|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
Cash
($)(1)
|
|
Equity
($)(2)
|
|
Nonqualified
Deferred
Compensation
Plans ($)(3)
|
|
Perquisites/
Benefits
($)(4)
|
|
Total Value
($)(5)
|
|
Peter D. Staple
|
|
|
1,142,760
|
|
|
2,275,026
|
|
|
200,000
|
|
|
43,361
|
|
|
3,461,146
|
|
Robert S. Breuil
|
|
|
532,140
|
|
|
829,660
|
|
|
70,000
|
|
|
41,252
|
|
|
1,403,052
|
|
Joseph J. Sarret, M.D., J.D.
|
|
|
485,380
|
|
|
862,420
|
|
|
70,000
|
|
|
28,907
|
|
|
1,376,707
|
|
Parminder Singh, Ph.D.
|
|
|
522,480
|
|
|
855,262
|
|
|
70,000
|
|
|
41,252
|
|
|
1,418,994
|
|
-
(1)
-
Cash.
Represents the value of the maximum cash severance payments
payable under the applicable executive officer's Change in Control Severance Agreement (i.e. the cash severance payments payable upon a qualifying termination of employment in connection with a
Change in Control, which is a termination without cause or resignation for good reason, in each case, within 12 months of the Closing Date, provided that the executive signs a release of claims
in connection with such termination), as described above in the section entitled "
Agreements or Arrangements with Executive Officers of
Corium.
" The severance amounts in this column are all "double trigger" in nature, which means that payment of these amounts is conditioned upon a qualifying termination within
12 months of the Closing Date.
As
described above in the section entitled "
Agreements or Arrangements with Executive Officers of Corium,
" the value of the severance
payments payable to an executive officer under such officer's Change in Control Severance Agreement will be lower in the event of a qualifying termination of employment outside of a Change in Control,
which is a termination without cause or resignation for good reason that occurs outside of a Change in Control, including after 12 months following
14
Table of Contents
the
Closing Date, provided that the executive signs a release of claims in connection with such termination. The table below sets forth the maximum value of salary severance payments and target bonus
severance payable under the applicable executive officer's Change in Control Severance Agreement in the event of a qualifying termination of employment outside of a Change in Control.
|
|
|
|
|
Name
|
|
Cash ($)
|
|
Peter D. Staple
|
|
|
767,195
|
|
Robert S. Breuil
|
|
|
399,105
|
|
Joseph J. Sarret, M.D., J.D.
|
|
|
364,035
|
|
Parminder Singh, Ph.D.
|
|
|
522,480
|
|
The
amounts included in the main table and the footnote table above were calculated based upon the executive officer's base salary as in effect on October 22, 2018 ($484,600 for
Mr. Staple, $380,100 for Mr. Breuil, $346,700 for Dr. Sarret and $373,200 for Dr. Singh) and the executive officer's current target annual bonus amount ($266,530 for
Mr. Staple, $152,040 for Mr. Breuil, $138,680 for Dr. Sarret and $149,280 for Dr. Singh). As a result, the amounts do not reflect the annual salary adjustments and
determination of 2018 fiscal year bonuses that are expected to be made before the Closing Date. In accordance with the terms of the Merger Agreement, the aggregate amount of any salary increases for
all executive officers plus three other senior employees may not exceed $170,000 per annum and the aggregate amount of fiscal 2018 cash bonuses to be paid to all employees, including the executive
officers, may not exceed $2 million.
-
(2)
-
Equity.
Represents (i) the maximum aggregate payments to be
made in respect of unvested options (for which the exercise price is less than $12.50) and unvested RSUs in connection with the termination, and (ii) the total amount that is expected to be
payable to the executive officer under the CVR Agreement with respect to such executive officer's Shares and vested options as of October 22, 2018, as described in greater detail above in the
section entitled "
Relationship with Parent and Merger Sub
Contingent Value Rights
Agreement
."
Treatment
of unvested options and unvested RSUs in the Transactions is described above in the section entitled "
Effect of the Offer and the Merger Agreement on
Corium Equity Incentive Plans, Corium Compensatory Awards and the ESPP,
" and the values attributable to such awards in this column assume such awards accelerate pursuant to a
qualifying termination immediately after the Closing Date. The acceleration is therefore "double trigger" in nature.
The
amounts in this column attributable to the CVR Agreement payments (and described above in clause (ii) of this footnote) are conditioned upon the occurrence of the CVR Payment Event. These
amounts reflect the CVR payment that would potentially be made in respect of the executive officer's Shares and vested options, but not with respect to the unvested options or unvested RSUs because
the CVR does not apply to unvested options or unvested RSUs.
The
estimated number of shares subject to unvested options and unvested RSUs that will accelerate pursuant to a qualifying termination within twelve months of the Closing Date and the cash payments
associated with such awards, as well as the cash payments payable pursuant to the CVR Agreement, are quantified for each executive officer in the table below and are calculated based on outstanding
equity awards held as of October 22, 2018. The CVR is included as an equity
15
Table of Contents
based
payment because it is a portion of the Offer Price payable to the executive officer in exchange for his or her Shares and vested options.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Unvested
Option
Shares
(#)
|
|
Amount
Payable
($)
|
|
Unvested
RSUs
(#)
|
|
Amount
Payable
($)
|
|
CVR
Payment
($)
|
|
Total
Value
($)
|
|
Peter D. Staple
|
|
|
285,625
|
|
|
1,116,649
|
|
|
54,687
|
|
|
683,588
|
|
|
474,790
|
|
|
2,275,026
|
|
Robert S. Breuil
|
|
|
96,250
|
|
|
418,327
|
|
|
17,187
|
|
|
214,838
|
|
|
196,496
|
|
|
829,660
|
|
Joseph J. Sarret, M.D., J.D.
|
|
|
97,760
|
|
|
368,357
|
|
|
32,187
|
|
|
402,338
|
|
|
91,725
|
|
|
862,420
|
|
Parminder Singh, Ph.D.
|
|
|
100,312
|
|
|
414,156
|
|
|
24,687
|
|
|
308,588
|
|
|
132,519
|
|
|
855,262
|
|
As
described above in the section entitled "
Agreements or Arrangements with Executive Officers of Corium,
" if the executive officer
experiences a qualifying termination more than 12 months following the Closing Date, the equity payments will be lower than as described in the table immediately above. Instead, and assuming
that (i) the Closing Date occurs on October 22, 2018 and (ii) each executive officer terminates his employment with Corium triggering severance payments and benefits on the day
immediately following the Effective Time, the payments would be as set forth in the following table and are calculated based on outstanding equity awards held as of October 22, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Unvested
Option
Shares
Subject to
Acceleration
(#)
|
|
Amount
Payable
($)
|
|
Unvested
RSUs
Subject to
Acceleration
(#)
|
|
Amount
Payable
($)
|
|
CVR
Payment
($)
|
|
Total
Value
($)
|
|
Peter D. Staple
|
|
|
125,208
|
|
|
1,565,100
|
|
|
15,625
|
|
|
195,313
|
|
|
474,790
|
|
|
2,235,203
|
|
Robert S. Breuil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
196,496
|
|
|
196,496
|
|
Joseph J. Sarret, M.D., J.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91,725
|
|
|
91,725
|
|
Parminder Singh, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
132,519
|
|
|
132,519
|
|
For
each table in this footnote (2) above, the consideration for accelerated unvested Corium Compensatory Awards is equal to an amount in cash equal to the product of (x) the number of
Shares issuable under such unvested Corium Compensatory Awards that are accelerated multiplied by (y) the excess of (A) the Closing Amount over (B) the per share exercise price
(to the extent applicable).
-
(3)
-
Nonqualified Deferred Compensation Plans.
This column represents the
estimated amounts expected to be allocated and payable to the executive officers under the Transition Bonus Plan, which amounts remain subject to further adjustment and approval at a future date by
the Compensation Committee of Corium's Board in its sole and absolute discretion. The maximum aggregate amount that may be allocated to all eligible participants (including the executive officers)
under the Transition Bonus Plan is $750,000. Receipt of the amounts under the Transition Bonus Plan will be subject to certain conditions, including the first commercial sale of Corplex Donepezil, all
as described in greater detail above in the section entitled "
Transition Bonus Plan."
-
(4)
-
Perquisites/Benefits.
Represents the highest estimated value of COBRA
payments to which each executive officer may become entitled under his Change in Control Severance Agreement as described in greater detail above in the section entitled
"
Agreements or Arrangements with Executive Officers of Corium,"
and assumes such COBRA payments are made pursuant to a qualifying
termination of employment immediately after the Closing Date. The amounts in this column are all "double trigger" in nature, which means that payment of these amounts is conditioned upon a qualifying
termination within 12 months of the Closing Date.
16
Table of Contents
As
described above in the section entitled "
Agreements or Arrangements with Executive Officers of Corium,
" if the executive officer
experiences a qualifying termination more than 12 months following the Closing Date, the COBRA payments will be lower than as described in the table immediately above and , instead, the
payments would be as set forth in the following table:
|
|
|
|
|
Name
|
|
Perquisites/
Benefits
($)(4)
|
|
Peter D. Staple
|
|
|
28,907
|
|
Robert S. Breuil
|
|
|
30,939
|
|
Joseph J. Sarret, M.D., J.D.
|
|
|
21,680
|
|
Parminder Singh, Ph.D.
|
|
|
41,252
|
|
-
(5)
-
As noted above, pursuant to their Change in Control Severance Agreements, in the event that any payment to an
executive officer would be subject to the excise tax imposed by Section 4999 of the Code (as a result of a payment being classified as a parachute payment under Section 280G of the
Code), then such executive officer will be entitled to receive either full payment of such severance and other benefits under the Change in Control Severance Agreements, or such lesser amount which
would result in no portion of such benefits being subject to the excise tax, whichever results in the greater after-tax benefits to the executive officer. A definitive analysis will depend on the
Effective Time, the date of termination (if any) of the executive officer and certain other assumptions used in the calculation. For purposes of this disclosure, Corium assumes that this cutback will
not apply.
Effect of the Merger on Director and Officer Indemnification and Insurance
Pursuant to the Merger Agreement, for a period of six (6) years after the Effective Time, the Surviving Corporation will maintain
directors' and officers' liability insurance covering Corium, its subsidiaries and such persons currently covered by Corium's directors' and officers' liability insurance policy in their capacity as
directors, officers and/or employees on terms with respect to coverage no less favorable in the aggregate than those of such policy in effect on the date of the Merger Agreement with a cost not to
exceed 300% of the last annual premium paid by Corium prior to the date of the Merger Agreement (the "
Maximum Amount
"). If costs for such insurance
would at any time exceed the Maximum Amount, then the Surviving Corporation will maintain the broadest directors' and officers' liability insurance coverage as may be obtained for the Maximum Amount.
Pursuant
to the Merger Agreement, from and after the Effective Time, the Surviving Corporation shall, and Parent shall cause the Surviving Corporation to, fulfill and honor in all
respects the obligations of Corium pursuant to each indemnification agreement that is in effect between Corium and any individual who at the Effective Time is, or at any time prior to the Effective
Time was, a director or officer of Corium (each, an "
Indemnified Party
") and was made available to Parent and any indemnification or exculpation
provisions set forth in the certificate of incorporation and bylaws of Corium as in effect on the date of the Merger Agreement. For a period of six (6) years after the Effective Time,
(i) the certificate of incorporation and bylaws of the Surviving Corporation shall contain provisions no less favorable with respect to indemnification, advancement of expenses and exculpation
of each Indemnified Party than are set forth in the certificate of incorporation and bylaws of Corium as in effect on the date of the date of the Merger Agreement and (ii) the Surviving
Corporation shall, and Parent shall cause the Surviving Corporation to, fulfill and honor in all respects the obligations of Corium or the Surviving Corporation with respect to any indemnification or
exculpation provisions set forth in the certificate of incorporation or bylaws of Corium as in effect on the date of the Merger Agreement with respect to acts or omissions by persons covered by such
provisions and in the capacity covered thereby occurring at or prior to the Effective Time.
17
Table of Contents
Section 16 Matters
Prior to the Offer Acceptance Time, Corium and the Board shall take all actions to the extent necessary or as may be reasonably requested by any
party hereto in connection with the Merger Agreement to cause the Transactions and any and all dispositions or cancellations of equity securities of Corium (including any deemed dispositions or
cancellations and any derivative securities with respect to any equity securities of Corium) held by each individual who is subject to the reporting requirements of Section 16(a) of the
Exchange Act with respect to Corium, and who would otherwise be subject to Rule 16b-3 under the Exchange Act, to be exempt under Rule 16b-3 under the Exchange Act.
Item 4. The Solicitation or Recommendation
Recommendation of the Board
After careful consideration, including a thorough review of the terms and conditions of the Offer in consultation with Corium management and its
legal and financial advisors, on October 11, 2018, the Board, among other things, unanimously (1) declared that the Offer, the Merger and the other Transactions are advisable, fair to
and in the best interests of Corium and its stockholders; (2) adopted and approved the Merger Agreement and approved Corium entering into the Merger Agreement and consummation of the
Transactions, including the Offer and the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, including that the Merger shall be governed by Section 251(h) of
the DGCL and the Merger shall be consummated as soon as practicable following the Offer Acceptance Time; (3) determined to recommend that Corium's stockholders accept the Offer and tender their
Shares to Merger Sub pursuant to the Offer; and (4) resolved to take all actions necessary so that the restrictions on business combinations and stockholder vote requirements contained in
Section 203 of the DGCL and any other applicable law with respect to a "moratorium," "control share acquisition," "business combination," "fair price" or other forms of anti-takeover laws or
regulations that may purport to be applicable will not apply with respect to or as a result of the Merger, the Merger Agreement, the CVR Agreement, the Support Agreement and the other Transactions.
For the reasons described below, the Board unanimously recommends that Corium's stockholders accept the Offer and tender their Shares to Merger Sub in the
Offer.
In
reaching the conclusions and in making the recommendation described above, the Board took into account a number of reasons, described under the section entitled
"
Background of the Merger Agreement; Reasons for the RecommendationReasons for the Merger
."
A
copy of the press release issued by Corium, dated October 11, 2018, announcing the execution of the Merger Agreement is filed as Exhibit (a)(1)(G) and is incorporated
herein by reference.
A
copy of the press release of Gurnet, announcing the launch of the Offer, dated October 26, 2018 is filed as Exhibit (a)(1)(H) and is incorporated herein by reference.
Background of the Merger Agreement; Reasons for Recommendation
Background of the Merger Agreement
The Board, together with members of Corium's senior management, has from time to time during the past several years reviewed and considered
various strategic and other opportunities to enhance stockholder value. These reviews have included discussions as to whether the continued execution of Corium's strategy as a stand-alone company and
entering into commercial relationships that involve licensing of marketing rights or similar partnering arrangements with third parties with respect to Corium's products (referred to herein as
"commercial partnering transactions"), or the possible acquisition of, or merger with, a company with complementary capabilities and/or business assets, or
18
Table of Contents
the
potential sale of Corium to a third party, offered the best avenue to maximize stockholder value, and in evaluating such options the Board has considered the potential benefits and risks of any
such course of action.
In
connection with these reviews, the Board created a finance and transaction committee (the "
Committee
") in April 2016 to advise the
Board on various finance and transaction matters and related matters. The Committee is comprised of Mr. Greenwood, who is the chair of the Committee, Mr. Bjerkholt, Mr. Eastman,
Dr. Goddard and Mr. Staple.
On
February 4, 2017, Mr. Eastman introduced Mr. Staple to a representative of a strategic party ("
Party A
").
Following initial discussions, Corium and Party A entered into a confidentiality agreement and members of Corium's senior management and Party A's management met to provide information on their
respective businesses and discussed the possibility of combining the two companies. Corium requested that Guggenheim Securities, LLC ("
Guggenheim
Securities
") assist with Corium's review of a
potential combination and discussions with Party A. These discussions continued into early May 2017, but the parties determined not to pursue them further.
In
the context of Corium's review of its corporate strategy, the progress of its lead product development program and related financing requirements, the Board discussed the possibility
of engaging a financial advisor to assist with evaluating alternative paths beyond a potential transaction with Party A and, if requested, soliciting appropriate transactions.
On
March 30, 2017, the Board met, together with representatives of Guggenheim Securities and Fenwick & West LLP ("
Fenwick &
West
"), Corium's outside legal advisor. During the meeting, representatives of Guggenheim Securities led a discussion on Corium's strategic alternatives, including commercial
partnering transactions with third parties to co-promote or license Corium's products, continuing to execute Corium's stand-alone business plan, entering into a business combination with another
company, a solicitation of proposals from other parties for a sale of Corium, and a divestiture of assets. The Board and representatives of Guggenheim Securities also discussed the process that could
be followed to assess the potential interest of third parties in acquiring Corium, the parties that could be contacted as part of such a process and the timing and breadth of such outreach. In
particular, the Board considered which third parties would be most interested in acquiring Corium and had access to the necessary capital, and the likelihood and ability of such third parties to
consummate a transaction. Following this discussion, the Board authorized Corium's senior management to retain Guggenheim Securities as Corium's financial advisor with respect to a sale of control
strategic transaction. In selecting Guggenheim Securities as its financial advisor, the Board considered that, among other things, Guggenheim Securities is an internationally recognized investment
banking, financial advisory and securities firm whose senior professionals have substantial experience advising companies in, among other industries, the biopharmaceutical industry. Guggenheim
Securities, as part of its investment banking, financial advisory and capital markets businesses, is regularly engaged in the valuation and financial assessment of businesses and securities in
connection with mergers and acquisitions, recapitalizations, spin-offs/split-offs, restructurings, securities offerings in both the private and public capital markets and valuations for corporate and
other purposes.
Corium's
senior management was also engaged in discussions with multiple parties regarding a potential commercial partnering transaction relating to its Corplex Donepezil product,
including parties that management believed might be interested in potentially acquiring Corium. To avoid disrupting ongoing partnership negotiations, Guggenheim Securities was directed not to contact
certain of these partner candidates at that time. Due to the increasing activity level related to commercial partnering discussions, the diverse types of potential partners, deal structures and
geographic regions involved in potential transactions, the Board authorized Corium's senior management to retain an advisory firm to assist them with this project independently of Guggenheim
Securities.
19
Table of Contents
On
April 4, 2017, Corium entered into an engagement agreement with Locust Walk Securities, LLC ("
Locust Walk
"), to assist
Corium in pursuing and evaluating the commercial partnering transactions with third parties to license and market Corium's Corplex Donepezil product.
On
May 11, 2017 Corium announced the results of the first of two planned bioequivalence studies for Corplex Donepezil. The results were positive, demonstrating that the product
candidate met the primary statistical criteria for bioequivalence to oral Aricept® (donepezil hydrochloride) and provided clear guidance on the parameters for Corium's second
bioequivalence study in late 2017.
On
May 17, 2017, the Committee met, together with representatives of Fenwick & West and Locust Walk. At this meeting, representatives of Locust Walk and the Committee
members discussed potential commercial partnering transaction structures and potential partners.
Thereafter,
during the course of 2017, the Committee met on a number of occasions to discuss progress on the commercial partnering transactions and other strategic alternatives and
financing options.
In
May 2017, Corium completed an underwritten public offering at a public offering price of $6.25 per share and received net proceeds of $37.6 million. This financing was in
addition to the net proceeds of $18.5 million raised by Corium in a separate underwritten public offering in February 2017 at a public offering price of $3.00 per share.
Corium
evaluated various commercial partnering transactions until the execution of the Merger Agreement. With respect to U.S. marketing rights, Corium contacted a total of 42 parties,
and engaged in confidential discussions with 12 potential partners. Following these initial discussions, Corium engaged in advanced discussions with seven potential partners, including due diligence
with eight potential partners and term sheet discussions with five potential partners. By May 2018, these discussions narrowed to three potential partners, referred to as
"
Commercial Partner A,
" "
Commercial Partner B
" and "
Commercial Partner
C
." Discussions were initiated with an additional potential partner ("
Commercial Partner D
") in September 2018.
In
addition, Corium also contacted a total of 30 parties interested in marketing rights outside the United States, and engaged in confidential discussions with 16 potential partners.
Following these initial discussions, Corium engaged in advanced discussions with 11 potential partners, including due diligence with four potential partners and term sheet discussions with five
potential partners.
On
July 12, 2017, the Board met with representatives of Guggenheim Securities and Fenwick & West and members of Corium's senior management, who reviewed with the Board a
list of 16 strategic parties to contact to ascertain their interest in a potential acquisition of Corium. The Board then authorized representatives of Guggenheim Securities to contact these companies.
Following that date,
the list was expanded to include an additional seven strategic parties. From September 2017 through December 2017, Guggenheim Securities contacted these 23 strategic parties regarding a potential
acquisition of Corium. Following these discussions, 20 parties declined to evaluate a potential transaction and three parties ("
Party B
,"
"
Party C
" and "
Party D
") indicated interest in evaluating a potential acquisition of Corium.
On
July 30, 2017, Corium executed an engagement letter with Guggenheim Securities regarding its role as financial advisor with respect to a sale of control strategic transaction.
Representatives
of Guggenheim Securities continued preliminary discussions with Party D from August 2017 through December 2017, but Party D declined to enter into a
confidentiality agreement and did not otherwise pursue an acquisition of Corium.
On
November 17, 2017, Corium and Party B entered into a confidentiality agreement. The confidentiality agreement contained a "standstill" provision which prohibits Party B from
making public proposals to acquire Corium, but permitted Party B to make private communications (including
20
Table of Contents
acquisition
offers) to the Board at any time. After executing the confidentiality agreement, Corium then provided certain confidential information to Party B to enable it evaluate a potential
combination of the companies.
On
November 20, 2017, Corium and Party C entered into a confidentiality agreement and Corium then provided certain confidential information to Party C. On December 11,
2017, Party C indicated that it was not interested in pursuing an acquisition of Corium.
On
December 11, 2017, the Board met, together with representatives of Guggenheim Securities and Fenwick & West. The Board discussed strategic alternatives, including
potential commercial partnering transactions (including with Commercial Partner A and others), a potential acquisition of Corium, a potential merger with a company with complementary business assets,
and remaining an independent company and raising additional capital to further develop and commercialize Corplex Donepezil. Each of these topics were further discussed by the Committee at a meeting
held on December 20, 2017 together with representatives of Fenwick & West.
On
January 4, 2018, members of Corium's senior management visited the corporate offices of Party B to discuss a potential combination of Corium and Party B, and discussed their
respective businesses. On January 8, 2018, Mr. Staple met with the chief executive officer of Party B to discuss potential next steps for their discussions. During the course of January
2018, the companies exchanged preliminary financial information.
On
January 17, 2018, the Board met, together with representatives of Fenwick & West. The Board discussed strategic alternatives, including the status of discussions with
Party B and ongoing discussions with potential commercial partners.
On
each of February 1, 2018, February 8, 2018 and February 11, 2018, the Committee met, together with representatives of Fenwick & West and, in one instance,
representatives of Locust Walk. At each of these meetings, the Committee members discussed the status of potential commercial partnering transactions as well as the potential acquisition transaction
with Party B and financing alternatives to enable Corium to pursue the further development and commercialization of Corplex Donepezil as an independent company. The Committee continued to meet from
time to time during the first half of 2018 to discuss progress on the potential commercial partnering transactions and other strategic alternatives.
In
February 2018, the U.S. Food and Drug Administration (the "
FDA
") provided positive feedback that resulted in a decision by Corium to
submit the data from its successful 2017 bioequivalence study as the basis for establishing bioequivalence in the planned New Drug Application ("
NDA
")
for Corplex Donepezil.
From
July 2017 through February 2018, members of Corium's senior management sought debt financing with potential lenders to replace Corium's existing term debt, which provided for
substantial repayments of principal each quarter starting in September 2018. In March 2018, Corium sold $120 million aggregate principal amount of its 5.0% convertible notes due 2025. Corium
used approximately $55 million of the net proceeds from this offering to repay in full its borrowings under the existing term loan agreement, and the remainder was to be used to support
Corium's business, including funding for development of Corplex Donepezil and additional pipeline programs.
On
March 28, 2018, Mr. Staple met with the chief executive officer of Party B. Party B provided management projections and agreed to review a potential combination. Corium
and Party B, together with their financial advisors, continued these discussions through April 2018.
On
March 20, 2018, the Board met, together with representatives of Guggenheim Securities and Fenwick & West, and discussed Corium's strategic alternatives. As part of that
discussion, the Board noted that past outreach was only targeted at strategic partners and considered whether to expand
21
Table of Contents
outreach
to financial sponsors. Following discussion, the Board authorized Guggenheim Securities to reach out to five financial sponsors.
Between
April 2, 2018 and April 6, 2018 representatives of Guggenheim Securities contacted Party D again, and also contacted five prospective financial sponsors
(including Gurnet) regarding a potential acquisition of Corium. Party D and the four financial sponsors other than Gurnet declined to further evaluate an acquisition of Corium.
As
part of this process, on April 2, 2018, representatives of Guggenheim Securities contacted representatives of Gurnet about a potential acquisition of Corium. Guggenheim
Securities representatives introduced Gurnet to members of Corium's senior management on April 4, 2018.
On
April 6, 2018, representatives of Gurnet held a conference call with Peter D. Staple, Corium's President and Chief Executive Officer, and Robert S. Breuil, Corium's Chief
Financial Officer, to discuss their respective businesses and potential opportunities involving Gurnet and Corium. The terms of the discussion were preliminary and exploratory in nature, relating to
Corium's products and stage of development for Corplex Donepezil, but no price or terms of a potential transaction were discussed. At the conclusion of such discussions, the representatives of Gurnet
and Corium agreed that further discussions would be beneficial and that the parties should enter into a confidentiality agreement to facilitate the sharing of confidential information by the parties.
Later that day, Corium provided a form of confidentiality agreement, which was signed by an affiliate of Gurnet and Corium on April 12, 2018 (the "Initial Confidentiality Agreement").
Following
the execution of the Initial Confidentiality Agreement, Corium provided Gurnet with access to an electronic data room that contained certain confidential information related to
Corium's current commercial activities, development efforts and other business matters. During the following months, representatives of Gurnet conducted on-going business due diligence, focusing
largely on the commercial opportunity for Corplex Donepezil, with respect to Corium and a potential acquisition of Corium by Gurnet.
On
April 23, 2018, members of Corium's senior management held a conference call with representatives of Gurnet to introduce Corium and Gurnet's respective team members and to
continue the prior business opportunity discussions, but no price or terms of a potential transaction were discussed.
On
April 27, 2018, members of Corium's senior management held another conference call with representatives of Gurnet to introduce Corium to certain additional Gurnet team members
and to
continue the prior business opportunity discussions, but no price or terms of a potential transaction were discussed.
On
April 30, 2018, Corium requested that Gurnet enter into a revised confidentiality agreement reflecting the disclosure of confidential information by both parties and certain
additional terms, including a "standstill" provision.
On
May 1, 2018, the Board met, together with representatives of Guggenheim Securities and Fenwick & West. The Board discussed strategic alternatives, including the status
of discussions with Gurnet and ongoing discussions with potential commercial partners.
On
May 17, 2018, an affiliate of Gurnet and Corium executed the Confidentiality Agreement, which replaced the Initial Confidentiality Agreement and which contained a "standstill"
provision for a period of 12 months from the date of the Confidentiality Agreement, among other things.
During
the course of May and June 2018, representatives of Corium and representatives of Gurnet held periodic telephonic conferences primarily to discuss Corium's commercial prospects
and product market analyses and the background of its business, including information relating to its manufacturing facility in Grand Rapids, Michigan.
22
Table of Contents
On
June 25, 2018, the Board met, together with representatives of Guggenheim Securities and Fenwick & West. Representatives of Guggenheim Securities discussed with the
Board the landscape for acquisitions of biopharmaceutical companies by financial sponsors and by pharmaceutical companies. They also presented a preliminary valuation analysis of Corium that assumed
commercialization of Corplex Donepezil in the United States without a commercial partner, and discussed with the Board the methodologies used in the preliminary analysis. Representatives of
Fenwick & West discussed the Board's fiduciary duties with respect to an acquisition process. The Board also discussed Corium's continued efforts to enter into commercial partnering agreements
with two pharmaceutical companies, Commercial Partner A and Commercial Partner B, and the capabilities of those potential partners to effectively commercialize Corplex Donepezil. At the end of the
meeting, the Board directed Corium's senior management and representatives of Guggenheim Securities to continue discussions with Gurnet regarding a potential acquisition of Corium, and directed
Corium's senior management to continue negotiations with Commercial Partner A and Commercial Partner B.
The
discussions with Commercial Partner A continued until the execution of the Merger Agreement, including due diligence and negotiation of draft licensing and manufacturing and supply
agreements for a commercial partnering transaction involving multiple geographies, including the United States. Discussions with Commercial Partner B and Commercial Partner C concluded in July 2018.
Commercial Partner B indicated that it was not interested in further pursuing a transaction, and Corium determined not to proceed with further negotiations with Commercial Partner C because Corium
determined that it would not be able to agree on terms with Commercial Partner C that would be acceptable to Corium, and that Commercial Partner A would be better able to provide the appropriate
commercial capability and more likely to agree on terms that would be acceptable to Corium. Discussions with Commercial Partner D regarding rights to Corplex Donepezil in the United States (which
commenced in September 2018), and with other parties focused primarily on marketing rights outside the United States, continued until execution of the Merger Agreement.
On
July 19, 2018, representatives of Gurnet met with a representative of Guggenheim Securities at Gurnet's offices in Cambridge, Massachusetts. A representative of Gurnet
informally indicated that Gurnet was considering making a proposal to acquire Corium at a price of approximately $10.40 per share and a payment of an unspecified amount of additional consideration
contingent upon achievement of an undefined future sales milestone for Corplex Donepezil. A representative of Guggenheim Securities discussed this communication with members of Corium's senior
management and certain members of the Board.
On
July 20, 2018, the Board met, together with representatives of Guggenheim Securities and Fenwick & West, and discussed Corium's development programs and its strategic
alternatives, including potential commercial partnering arrangements and the recent discussions with Gurnet, including with respect to valuation. Following the Board meeting and at the direction of
the Board, on July 20, 2018, a representative of Guggenheim Securities, at the direction of the Board, contacted a representative of Gurnet and encouraged Gurnet to submit a formal offer to
acquire Corium to the Board, and indicated that such an offer would need to be at a higher price than the price communicated informally on July 19, 2018.
On
July 24, 2018, the Committee met, together with representatives of Guggenheim Securities and Fenwick & West, and discussed the status of the discussions with Gurnet and
its due diligence activity.
On
August 2, 2018, members of Corium's senior management and Guggenheim Securities met with representatives of Gurnet in Cambridge, Massachusetts where they provided information
relating to Corium's technology, product development programs and market opportunity analyses, organization and cost structures and discussed the possibility of Gurnet, through one of its affiliates,
acquiring Corium; however, neither the price nor the terms of the potential transaction were discussed.
23
Table of Contents
On
August 17, 2018, representatives of Gurnet delivered a non-binding proposal to acquire Corium (the "
August 17 Proposal
")
at a price of $12.00 per share, plus an additional $0.50 per share upon the approval of the New Drug Application for Corplex Donepezil by the FDA on or prior to December 31, 2019 (the
"
CVR
"). The August 17 Proposal contemplated a "two-step" merger involving a tender offer for the outstanding shares of Corium's common stock
followed by a short-form merger. The August 17 Proposal was conditioned on the receipt of a binding tender and support agreement from Essex Woodlands and the completion of due diligence by
Gurnet's representatives and advisors. The August 17 Proposal also requested that Corium agree to negotiate exclusively with Gurnet through September 30, 2018.
On
August 24, 2018, representatives of Guggenheim Securities, acting at the direction of the Board, informed representatives of Gurnet that the August 17 Proposal
represented insufficient value for Corium's stockholders.
On
August 23, 2018, the Board met, together with representatives from Guggenheim Securities and Fenwick & West. At the meeting, a representative of Fenwick & West
reviewed the Board's fiduciary duties with respect to a sale process and the August 17 Proposal, including Gurnet's request for exclusive negotiations. Representatives of Guggenheim Securities
also reviewed the financial aspects of Gurnet's offer and financial projections prepared by members of Corium's senior management. The Board directed representatives from Guggenheim Securities to
inform Gurnet that its offer presented insufficient value, and that Corium was not prepared to enter into any exclusivity arrangement in the context of an offer at such a price. The Board also
approved management's financial projections that assumed commercialization of Corplex Donepezil in the United States without a commercial partner (the "
Stand-alone
Projections
"). The Board also discussed the impact on that projection of potential commercial partnering transactions (including the risks and uncertainties inherent in such
transactions). Following this discussion, the Board authorized Guggenheim Securities to rely on the Stand-alone Projections for the purpose of its financial and fairness analysis related to the
proposed transaction. The Stand-alone Projections are described in further detail under the section entitled "
Certain Unaudited Prospective Financial Information
of Corium
." The Board also discussed whether to reach out to other potential buyers at this time. In view of the responses to the prior outreach by Guggenheim Securities and
the effect that potential leaks could have on the transaction with Gurnet and on the ongoing discussions with Commercial Partner A, the Board determined to defer discussions with other potential
buyers until discussions with Gurnet had progressed further.
On
August 27, 2018, representatives of Gurnet delivered to Corium a revised non-binding proposal to acquire Corium at a price of $12.50 per share, plus an additional $0.50 per
share upon the approval of the New Drug Application for Corplex Donepezil by the FDA on or prior to December 31, 2019 (the "
August 27
Proposal
"). The August 27 Proposal, consistent with the August 17 Proposal, provided that Essex Woodlands would enter into an agreement to support the
transaction, but did not require Corium to engage in any exclusivity arrangement with Gurnet. In response to the August 27 Proposal and to facilitate review of the August 27 Proposal by
the Board, a representative of Guggenheim Securities contacted Gurnet later that day to request that the relevant date for the contingent value right payment event be extended to March 31,
2020, which Gurnet agreed to consider. On the same day, a representative of Gurnet provided a detailed due diligence request list to Corium. The Board directed Guggenheim Securities to inform Gurnet
that Corium was prepared to provide Gurnet with
in-depth due diligence, and commence discussions regarding a transaction, on the basis of the August 27 Proposal.
On
August 29, 2018, a representative of Guggenheim Securities introduced representatives of Weil, Gotshal & Manges, LLP, Gurnet's outside legal advisor
("
Weil
") to representatives of Fenwick & West, for the purpose of facilitating legal due diligence and discussion of the legal terms of the
potential transaction.
24
Table of Contents
On
September 1, 2018, Corium provided representatives of Gurnet and representatives of Weil with access to a new electronic data room that contained non-public information about
Corium. Throughout the month of September 2018 and early October 2018, Corium's senior management engaged in detailed due diligence sessions with representatives of Gurnet and its advisors, and
provided detailed legal, financial, regulatory, human resources, business, tax, intellectual property, technical and operational due diligence materials to the electronic data room that were
responsive to Gurnet's due diligence requests.
On
September 6, 2018, representatives of Corium and its regulatory advisors met with representatives of the FDA regarding the clinical program and plans for an NDA submission for
Corplex Donepezil. The agency's responses to Corium's questions in this meeting provided additional confirmation of the steps required for preparing and submitting the NDA in the manner and timeframe
that Corium had planned. Representatives of Gurnet had informed Corium's senior management and Guggenheim Securities that its willingness to proceed with a transaction would depend on review of the
written minutes of the meeting to be provided by the FDA.
On
September 7, 2018, members of Corium's senior management gave a high-level summary of the FDA meeting to representatives of Gurnet. On September 8, 2018, members of
Corium's senior management met with representatives and advisors of Gurnet to provide a more detailed clinical and regulatory update regarding Corplex Donepezil, discuss CMC (manufacturing) issues and
provide updates from the FDA meeting.
On
September 11, 2018, Messrs. Greenwood and Eastman, each a member of the Board and the Committee, attended an in-person meeting in Burlingame, California with
representatives of Gurnet. At this meeting, Messrs. Greenwood and Eastman and the representatives of Gurnet discussed Corium's business and its history, and Gurnet's experience and track record
of investing in and acquiring companies in the healthcare industry.
From
September 11, 2018 through September 13, 2018, members of Corium's senior management held in-person due diligence meetings with representatives and advisors of Gurnet
at Corium's manufacturing facility in Grand Rapids, Michigan, and at its corporate headquarters in Menlo Park, California to discuss business, corporate, finance, manufacturing, regulatory and
technical diligence matters regarding the development of Corplex Donepezil and Corium's other product candidates and technologies, and the potential benefits of a transaction involving Gurnet and
Corium.
On
September 18, 2018, the Board met, together with representatives of Guggenheim Securities and Fenwick & West. Corium's senior management and representatives of
Guggenheim Securities updated the Board on the status of negotiations with Gurnet, and Gurnet's due diligence activities. Members of senior management also updated the Board on Corium's business
development activities, including discussions regarding a potential commercial partnering transaction for Corplex Donepezil as an alternative to an acquisition of Corium. The Board directed Corium's
senior management to continue negotiations with Gurnet regarding its August 27 Proposal and with potential commercialization partners, including Commercial Partner A.
On
September 22, 2018, representatives of Weil delivered an initial draft of the Merger Agreement to Fenwick & West. The draft included a proposed termination fee of 3.5%
of fully diluted equity value (which would have included shares of Corium's common stock issuable upon the conversion of Corium's outstanding convertible notes). The proposed draft included customary
restrictions on soliciting other proposals, but did not permit Corium to terminate the Merger Agreement to enter into an agreement with respect to a superior proposal. The proposed draft also provided
that unvested Corium options and unvested Corium restricted stock units would be converted into unvested options and unvested restricted stock units to acquire equity in Parent. The proposed draft
also did not indicate the source of funds for the acquisition. Representatives of Weil also informed Fenwick & West that, in
25
Table of Contents
addition
to Essex Woodlands, Gurnet would like other large stockholders of Corium to execute a tender and support agreement in favor the transaction prior to announcement of the transaction.
On
September 24, 2018, the Committee met, together with representatives of Guggenheim Securities and Fenwick & West. At the meeting, a representative of Fenwick &
West discussed the terms of the draft Merger Agreement with the Committee. The Committee directed Fenwick & West to continue negotiating the draft Merger Agreement and provided Fenwick &
West with direction on the positions to take with respect to the issues in the Merger Agreement.
Later
on September 24, 2018, representatives of Corium, Guggenheim Securities and Fenwick & West discussed certain terms of the draft Merger Agreement with representatives
of Gurnet and Weil,
including the source of funds for the transactions and the stockholders who could be required to sign a tender and support agreement and the process for approaching those stockholders.
On
September 26, 2018, representatives of Fenwick & West delivered a revised draft of the draft Merger Agreement to Weil. This draft provided for a termination fee of
$15 million, which represented approximately 3.0% of Corium's equity value (based on the treasury method for stock options, restricted stock units and warrants, and excluding any shares
issuable upon the conversion of Corium's outstanding convertible notes), a number of changes to Corium's representations and warranties and interim operating covenants, and allowed Corium to terminate
the Merger Agreement to accept an unsolicited superior proposal. This draft also included a request for Gurnet to identify its source of funds for the transaction.
On
September 29, 2018, the Board met, together with representatives of Guggenheim Securities and Fenwick & West. Representatives of Fenwick & West discussed the
proposed terms of the draft Merger Agreement and the progress on negotiations, and the Board provided Fenwick & West with direction on the positions to take with respect to the open issues. A
representative of Fenwick & West also discussed the Board's fiduciary duties regarding an acquisition proposal and the solicitation of interest from additional parties. A representative of
Guggenheim Securities then discussed a process to solicit proposals from third parties that may be interested in acquiring Corium. The Board identified 12 parties, including eight parties that had
been contacted in 2017 with respect to a potential acquisition of Corium (including Party C and Party D), and four parties that had not previously been contacted, that the Board believed would have
the greatest likelihood of being interested in acquiring Corium and had the financial resources (or access to capital) to consummate a transaction. The Board determined that reaching out to parties
beyond these 12 would not be in the best interests of Corium's stockholders because such outreach would be unlikely to produce a superior proposal in view of the previous outreach efforts, and would
increase the risk of a public disclosure that could compromise the negotiations with Gurnet and with Commercial Party A. The Board then directed Guggenheim Securities to contact these 12 parties.
On
September 29, 2018, following discussions between representatives of Corium and Gurnet, Fenwick & West provided Weil with proposed revisions to the sections of the
Merger Agreement addressing treatment of unvested Corium options and unvested Corium restricted stock units, which contemplated that such equity awards would not be assumed by Parent, but instead
replaced with cash awards equal to $12.50 per share less, in the case of stock options, any applicable exercise price, and such cash awards would be distributed to the holders of such awards subject
to and following achievement of the vesting terms of the original equity awards. The proposal also contemplated that a transition bonus plan be established for the benefit of certain continuing
employees and consultants, with the aggregate value of such plan to be discussed by the parties.
Between
October 2, 2018 and October 11, 2018, representatives of Guggenheim Securities and, in some cases, members of the Board, contacted each of the 12 parties identified
at the September 29, 2018 Board meeting. Eleven of these parties declined to pursue an acquisition or did not respond to the outreach. One strategic party, Party E, indicated that it was
interested in receiving confidential materials to evaluate a potential acquisition transaction.
26
Table of Contents
In addition, Corium continued to provide diligence materials in the electronic data room, as requested by Gurnet, until the execution of the Merger Agreement, and
representatives of Fenwick & West continued to negotiate the terms of the Merger Agreement with representatives of Weil, and there were also several communications between representatives of
Gurnet and representatives of Guggenheim to discuss various open issues related to the Transactions.
On
October 2, 2018, representatives of Weil provided to Fenwick & West a proposed draft of the CVR Agreement and a revised draft of the Merger Agreement. In this draft CVR
Agreement, the required date for approval of the Corplex Donepezil NDA was extended to March 31, 2020. The revised draft Merger Agreement included a termination fee of 3.5% of Corium's fully
diluted equity value. The revised draft did not permit Corium to terminate the Merger Agreement to enter into an agreement with respect to an unsolicited superior proposal, expanded the no
solicitation covenant to also restrict Corium from engaging in discussions with third parties regarding licensing opportunities after execution of the Merger Agreement, and provided that the offer
condition relating to Corium's intellectual property and health and regulatory representations and warranties would require that such representations and warranties be true and correct except for such
failures that are not, individually or in the aggregate, material to Corium. Additionally, the revised draft included an obligation for Corium to assist Gurnet in arranging debt financing, but did not
otherwise indicate the intended source of funds for the transaction. The revised draft also proposed that Gurnet may require one or more
stockholders other than Essex Woodlands to execute a tender and support agreement. Later that day, representatives of Fenwick & West provided Weil with draft disclosure schedules to the Merger
Agreement.
On
October 4, 2018, representatives of Fenwick & West discussed the draft Merger Agreement with representatives of Weil, including the source of funds for the transaction,
the size of the termination fee and the required signatories to a tender and support agreement.
On
October 5, 2018, Corium received minutes from the FDA that, among other things, reflected the oral feedback provided by the FDA at the September 6, 2018 meeting
described above and, on the same day, Corium shared these minutes with Gurnet and members of Corium's senior management had a telephone discussion with representatives of Gurnet to discuss the
minutes.
On
October 6, 2018, representatives of Weil and Fenwick & West discussed the remaining open issues in the draft Merger Agreement, including the ability of Corium to
terminate the agreement to accept an unsolicited superior proposal, the identity of the stockholders to be parties to the tender and support agreement, the termination fee payable by Corium and the
triggers for payment of the termination fee and the representations to be made by Corium. During these discussions, representatives of Weil proposed that Gurnet would commit to provide equity
financing sufficient to pay the required consideration under the Merger Agreement.
Later
in the evening on October 6, 2018, representatives of Fenwick & West delivered to Weil proposed revisions to the draft CVR Agreement. The revised draft included an
obligation of Parent to use reasonable efforts to obtain FDA approval of the New Drug Application for Corplex Donepezil.
On
October 7, 2018, representatives of Fenwick & West provided Weil with a revised draft of the Merger Agreement, which permitted Corium to terminate the Merger Agreement
to accept a superior proposal and proposed that Essex Woodlands (but no other stockholders) would execute a tender and support agreement, and also provided that the offer condition relating to
Corium's intellectual property and health and regulatory representations and warranties would require that such representations and warranties be true and correct except for such failures that have
not had a material adverse effect. On the same day, representatives of Weil provided Fenwick & West with an initial draft of the Support Agreement, which contained a six month "tail period"
requiring signatories to the Support Agreement to oppose any other acquisition proposal for six months after the termination of the Merger Agreement.
27
Table of Contents
On
October 8, 2018, Corium and Party E entered into a confidentiality agreement, which contains a standstill agreement, and Corium provided Party E with access to an electronic
data room that contained non-public information about Corium.
Also
on October 8, 2018, representatives of Weil provided Fenwick & West with a revised draft of the Merger Agreement. The draft Merger Agreement permitted Corium to
terminate the Merger Agreement to accept an unsolicited superior offer and provided for a termination fee of $19.0 million, which represented 3.9% of Corium's equity value (on a fully diluted,
treasury stock basis based on the Closing Amount of $12.50 per Share) and 3.8% of such equity value including the $0.50 per Share payable pursuant to the CVR. The draft additionally proposed that the
circumstances in which the termination fee would be payable by Corium if the Merger Agreement was terminated after a rival offer to acquire Corium became publicly known would include a grant by Corium
of an exclusive license to any of its core products to another third party within 12 months of such termination. The draft additionally confirmed that Essex Woodlands would be the only Corium
stockholder required to execute the Support Agreement.
Also
on October 8, 2018, representatives of Weil and Fenwick & West exchanged drafts of the Support Agreement and agreed that such agreement would not include any "tail
period."
On
October 9, 2018, representatives of Fenwick & West discussed the terms of the draft Merger Agreement with representatives of Weil, including the provision requiring
Corium to pay a termination fee to Gurnet, under certain circumstances, if it granted a third party an exclusive license to any of its core products after the termination of the Merger Agreement.
Also
on October 9, 2018, a representative of Party E contacted a representative of Guggenheim Securities and informed him that Party E was not interested in pursuing an
acquisition of Corium, noting that they believed that the development of Corium's business would require substantial future, dilutive financing.
Also
on October 9, 2018, a representative of Fenwick & West introduced Weil to a representative of Wilson Sonsini Goodrich & Rosati, Professional Corporation
("
WSGR
"), counsel to Essex Woodlands, to discuss the provisions of the Support Agreement.
Also
on October 9, 2018, a representative of Weil sent an initial draft of the Commitment Letter to be entered into by Gurnet and Parent, which provided for, among other things,
Gurnet's commitment to provide Parent with sufficient funds to pay for the aggregate transaction consideration.
Later
on October 9, 2018, the Board met, together with representatives of Guggenheim Securities and Fenwick & West. During the meeting, a representative of Fenwick &
West reviewed with the Board the
terms of the proposed Merger Agreement with Parent, including, among other things, (i) the consideration of $12.50 per share in cash plus a contingent value right equal to $0.50 per share
payable upon FDA approval of Corplex Donepezil on or prior to March 31, 2020 (the "
Offer Price
"), (ii) the treatment of Corium's
outstanding equity incentives, (iii) closing conditions and estimated closing timing, (iv) the definition of "material adverse effect," (v) key covenants, including the
restrictions on soliciting competing offers, (vi) covenants regarding Corium's conduct of its business between signing and closing, (vii) certain terms regarding Corium's employees,
(viii) the termination fee of $19.0 million and the events under which the termination fee would be payable and (ix) the termination provisions, including the ability of Corium to
terminate the Merger Agreement to accept an unsolicited superior offer. The representative of Fenwick & West then reviewed the key open issues remaining in the draft Merger Agreement, including
the size of the termination fee and the circumstances under which that fee would be paid, and the Board's fiduciary duties in considering whether to approve the Merger Agreement.
Following
the presentation by representatives of Fenwick & West, representatives of Guggenheim Securities presented to the Board its preliminary financial analysis of the Offer
Price. The
28
Table of Contents
representatives
of Guggenheim Securities also presented on the process that Corium had executed to solicit additional proposals, including outreach to parties that were most likely to be interested in
acquiring Corium in 2017, and the additional outreach to potential acquirers after meetings of the Board on March 20, 2018 and September 29, 2018. The representatives indicated to the
Board that Guggenheim Securities was prepared to deliver its opinion as to the fairness, from a financial point of view, of the Offer Price to the stockholders of Corium.
After
the presentations, the Board directed representatives of Fenwick & West to finalize the Merger Agreement, with a termination fee of not more than $19 million, and on
terms that would not require Corium to pay any termination fee solely due to Corium entering into a licensing arrangement after the termination of the Merger Agreement unless such license required
approval by Corium's stockholders or the proceeds of such license (i) were distributed to Corium's stockholders in any special or extraordinary dividend within 12 months of the date of
grant or (ii) would constitute all or substantially all of Corium's assets.
From
October 9, 2018 through the morning of October 11, 2018, representatives of Weil and Fenwick & West discussed and finalized the Merger Agreement, CVR Agreement,
Support Agreement, Commitment Letter and Corium's disclosure schedules, and representatives of Weil and WSGR finalized the Support Agreement.
On
October 11, 2018, the Board met, together with representatives of Guggenheim Securities and Fenwick & West. At the meeting, a representative of Fenwick & West
reviewed the terms of the final Merger Agreement, and again discussed the Board's fiduciary duties in considering a proposal to acquire Corium. Representatives of Guggenheim Securities reviewed with
the Board Guggenheim Securities' financial analysis of the Offer Price and rendered an oral opinion, confirmed by delivery of a written opinion, dated October 11, 2018, to the Board to the
effect that, as of that date and based on and subject to the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken as
set forth in the written opinion, the Offer Price to be received in connection with the Transactions was fair, from a financial point of view, to the stockholders of Corium. The section entitled
"
Opinion of Corium's Financial Advisor
" contains a more detailed description of the Guggenheim Securities financial analyses and the
opinion rendered by Guggenheim Securities to the Board.
After
deliberation, including consideration of the factors described in the section entitled "
Reasons for the
Recommendation
," the Board unanimously (i) declared that the Merger Agreement, the Merger and the other Transactions are advisable, fair to and in the best interests of
Corium and its stockholders, (ii) adopted and approved the Merger Agreement and approved Corium's entry into the Merger Agreement and the consummation of the Transactions, including the Offer
and the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, and (iii) determined to recommend that the stockholders of Corium (other than Parent and its
subsidiaries) accept the Offer and tender their shares to Merger Sub pursuant to the Offer.
Following
the approval by the Board, the parties executed the Merger Agreement and the Support Agreement, and representative of Essex Woodlands executed the Support Agreement, on
October 11, 2018.
After
the close of trading on Nasdaq on October 11, 2018, Corium issued a press release announcing the execution of the Merger Agreement.
Reasons for Recommendation
In recommending that Corium's stockholders accept the Offer and tender their Shares to Merger Sub pursuant to the Offer, the Board considered
the terms of the Offer, the Merger and the other Transactions, consulted with Corium's management and its financial and legal advisors, and considered
29
Table of Contents
a
number of factors, including the following (which are not necessarily presented in order of relative importance):
Financial Terms; Certainty of Value
-
-
that the Closing Amount of $12.50 in cash to be received by Corium's stockholders provides immediate and certain value and liquidity and does
not expose them to any future risks related to Corium's business or financial markets generally;
-
-
that Corium's stockholders would have the opportunity to receive additional value through the CVR payment, which will provide them with an
additional $0.50 in cash consideration per Share if the FDA approves the New Drug Application for Corplex Donepezil on or prior to March 31, 2020 (the "
CVR Payment
Event
");
-
-
that the CVR Agreement requires Parent to cause the Surviving Corporation to use reasonable efforts to achieve the CVR Payment Event, and the
Board's belief that the Surviving Corporation has reasonable prospects to achieve the CVR Payment Event given the current phase of development of, and the regulatory pathway applicable to, Corplex
Donepezil;
-
-
the relationship of the Offer Price to the trading price of the Shares, including the fact that:
-
-
the Closing Amount represents a premium of approximately 50.1% to the unaffected closing price of Corium's common stock as of
October 10, 2018, the last full trading day prior to the Board's approval of the Merger Agreement;
-
-
the Closing Amount represents a premium of approximately 36.5% to the volume-weighted average closing price of Corium's common
stock over the 30- trading-day period ending on October 10, 2018;
-
-
the Closing Amount plus the full value of the CVR represents a premium of approximately 42.0% to the volume-weighted average
closing price of Corium's common stock over the 30- trading-day period ending on October 10, 2018; and
-
-
the Closing Amount and an assumed value of $0.39 for the CVR (which reflects adjustment for the probability of success of the FDA
approval provided by Corium's senior management and an estimate of the time value of money), represents a premium of approximately 40.8% to the volume-weighted average closing price of Corium's common
stock over the 30- trading-day period ending on October 10, 2018;
-
-
the Board's assessment of Corium's implied value on a stand-alone basis relative to the Offer Price, based, in part, on the financial analyses
presented to the Board by Guggenheim Securities, as more fully described in the section entitled "
Opinion of Corium's Financial Advisor
";
and
-
-
the opinion, dated October 11, 2018, of Guggenheim Securities to the Board as to the fairness, from a financial point of view and as of
the date of the opinion, of the Offer Price to the stockholders of Corium, which opinion was based on and subject to the matters considered, the procedures followed, the assumptions made and various
limitations of and qualifications to the review undertaken as set forth in the written opinion, as more fully described under the section entitled "
Opinion of
Corium's Financial Advisor
" below.
Prospects of Corium
-
-
Corium's current and historical business, financial condition, results of operations, competitive position, strategic alternatives and
financial prospects, as well as Corium's long-term business plan and prospects if it were to remain an independent public company;
30
Table of Contents
-
-
the fact that Corium is not profitable and would need to raise significant additional capital to continue operations and the fact that the
availability and cost of that capital is uncertain;
-
-
the potential risks to Corium remaining a stand-alone public entity, which would require Corium to either self-fund the commercialization of
its products and product candidates, including Corplex Donepezil, or collaborate with a commercial partner to obtain such funding, including;
-
-
that Corium might not be able to finalize an agreement with a commercial partner in a timely manner or on acceptable terms, taking
into account the progress of partnering discussions over an extended period of active outreach and negotiations;
-
-
that an agreement with a commercial partner, if achieved, would continue to involve significant risks and uncertainties, including
risks related to the commercial partner's commitment and capability to effectively commercialize Corplex Donepezil and to generate significant future revenues for Corium, and the potential that these
commercialization efforts could be affected by competing initiatives of the partner and competing plans by the partner to submit its own products for FDA approval at approximately the same time as
Corium's planned NDA submission for Corplex Donepezil;
-
-
that self-funding the commercialization of Corium's products and product candidates, including Corplex Donepezil, would require
significant additional capital (in the form of equity financing, additional indebtedness or otherwise), which would be dilutive to Corium's stockholders and may not be available on acceptable terms,
if at all, when such capital is required;
-
-
that Corium's operating results are dependent, among other things, on demand for Corium's products and on the commercial success
of the products marketed by our partners, both of which fluctuate significantly for reasons that are often beyond Corium's or a partner's control;
-
-
that commercialization of Corium's products and product candidates requires FDA and other regulatory approvals and there is no
guarantee that Corium will receive those approvals without significant expense or delay or at all;
-
-
that commercialization of Corium's products, whether by a partner or Corium, will require establishing pricing and reimbursement
status with governmental and private payers, in an environment where pricing pressures on pharmaceutical products is increasing, in particular for products that are treated as new formulations of
pre-existing drugs;
-
-
volatility within the U.S. and global economy;
-
-
general stock market conditions and volatility; and
-
-
the other risks and uncertainties identified in Corium's filings with the SEC;
-
-
the Board's belief, based on discussions and negotiations by Corium's senior management and advisors with Gurnet and other potentially
interested parties, that the Offer Price was the highest price that Gurnet or any other interested party would reasonably be willing to pay;
-
-
the Board's belief that continuing to pursue a partnering transaction would be unlikely to result in greater value to Corium's stockholders
based on (1) extensive negotiations with potential commercial partners, (2) the inherent uncertainties of achieving sufficient future cash flows following a commercial launch and
marketing of a product by a partner (and the risk that the partner may not launch the product on a timely basis, if at all), (3) the transfer of control over commercialization activities and
the requirement to enable an alternative (second source) manufacturing site, and including the potential transfer of valuable trade secrets to third parties located in other countries, (4) the
unpredictability of partners' commercial priorities relating to
31
Table of Contents
Active Competitive Process
-
-
the fact that Corium actively sought proposals from numerous other parties that it believed were logical potential buyers, as more fully
described above under the heading "
Background of the Merger Agreement
," including strategic buyers and financial sponsors;
-
-
the fact that early on in the process, at the direction of the Board, representatives of Corium and Guggenheim Securities contacted a total of
28 parties, composed of 23 strategic parties and 5 financial sponsors, in an effort to obtain the best value reasonably available to stockholders;
-
-
the fact that in the weeks immediately prior to entering into the Merger Agreement, at the direction of the Board, representatives of
Guggenheim Securities and, in some cases, members of the Board, contacted 12 parties (including eight parties that had been contacted previously) that the Board believed would have the greatest
likelihood of being interested in acquiring Corium and had the financial resources (or access to capital) to consummate a transaction to solicit a proposal that was superior to Gurnet;
-
-
the fact that after this outreach, Gurnet was the only party to submit a formal proposal to acquire Corium;
-
-
the fact that Gurnet would not be willing to consummate a transaction on a more protracted timeline that would accommodate further outreach to
other potential buyers; and
-
-
the Board's view that the Merger Agreement (1) was the product of arm's-length negotiations, (2) contained terms and conditions
which were favorable to Corium, and (3) was the result of an active solicitation process.
Speed and Likelihood of Consummation
-
-
the structure of the transaction as a two-step transaction under Section 251(h) of the DGCL, which potentially enables Corium's
stockholders to receive the Offer Price pursuant to the Offer in a relatively short time frame, followed promptly by the Merger in which Corium's stockholders who do not tender in the Offer will
receive the same price per share as is paid in the Offer, and that such relatively short timeframe would be expected to reduce the uncertainty and potential disruption to Corium's business pending the
closing of the Merger;
-
-
the likelihood that the Offer and the Merger would be consummated, including that:
-
-
Merger Sub is required, subject to certain exceptions, to extend the Offer;
-
-
the conditions to the Offer and the Merger are specific and limited, so that the Transactions are likely to be completed if a
sufficient number of Shares are tendered in the Offer;
-
-
that Essex Woodlands executed the Support Agreement and agreed to tender its Shares to Merger Sub in the offer;
32
Table of Contents
-
-
the Board's belief, following consultation with its legal advisors, that the Transactions presented a limited risk of not
achieving regulatory clearance or having a delay in the consummation of the Transactions due to regulatory review;
-
-
Parent and Merger Sub have obtained the equity financing commitments to fund the Transactions that provide for Corium as an
express third-party beneficiary and permit Corium to specifically enforce the obligations of such commitments to enable Parent and Merger Sub to fulfill its obligations under the Merger Agreement;
-
-
Corium's ability to specifically enforce Parent and Merger Sub's obligations under the Merger Agreement, including Parent and
Merger Sub's obligations to consummate the Offer and the Merger, and Corium's ability to seek damages upon any intentional breach by Parent or Merger Sub of the Merger Agreement;
-
-
the business reputation and capabilities of Gurnet and its management and the financial resources of Gurnet and, by extension,
Parent and Merger Sub; and
-
-
the outside date under the Merger Agreement on which either party, subject to certain exceptions, can terminate the Merger
Agreement allows for sufficient time to consummate the Transactions;
-
-
the Board's belief that the terms of the Merger Agreement, taken as a whole, provide a high degree of protection against the risk that the
consummation of the Merger will be unduly delayed or that the Merger will not be consummated; and
-
-
the Board's belief that the Merger Agreement's restrictions on Corium's ability to take certain actions during the pendency of the Merger will
not unduly interfere with Corium's ability to operate its business in the ordinary course.
General Matters
-
-
Corium's ability to terminate the Merger Agreement in order to enter into an alternative transaction that the Board determines to be a
"superior proposal," subject to certain conditions set forth in the Merger Agreement (including Parent's right to have an opportunity to revise the terms of the Merger Agreement) and Corium's
obligation to pay the termination fee of $19 million;
-
-
the right of the Board, under certain circumstances specified in the Merger Agreement, to withdraw, qualify or modify its recommendation that
Corium stockholders accept the Offer and tender their shares to Merger Sub in the event that an "intervening event" with respect to Corium occurs, subject to certain conditions set forth in the Merger
Agreement (including Parent's right to have an opportunity to revise the terms of the Merger Agreement) and Corium's obligation to pay the termination fee of $19 million in the event that
Parent were to terminate the Merger Agreement following such withdrawal, qualification or modification;
-
-
the Board's belief, after discussion with its advisors, that the termination fee of $19 million would not preclude or substantially
impede a possible superior proposal from being made;
-
-
the availability of statutory appraisal rights under the DGCL for the holders of Shares who do not tender their Shares in the Offer and who
otherwise comply with the required procedures under the DGCL;
-
-
the Board's familiarity with Corium's business, operations, financial condition, results of operations, strategic alternatives, financial
prospects and competitive position, and economic and market conditions;
33
Table of Contents
-
-
the fact that resolutions approving the Merger Agreement were unanimously approved by the Board, which is comprised of at least a majority of
independent directors who are neither affiliated with Gurnet nor employees of Corium, and which retained and received advice from Fenwick & West and Guggenheim Securities in evaluating,
negotiating and recommending the terms of the Merger Agreement;
-
-
the interest of Corium's executive officers and directors in the Transactions that may be different from, or additive to, those of Corium's
stockholders generally; and
-
-
the requirement that the Transactions will only occur if the holders of at least a majority of Corium's Shares tender their Shares in the
Offer, providing Corium's stockholders with the ability to approve or disapprove of the Transactions.
The
Board also considered a number of uncertainties, risks and potentially negative factors in its deliberations concerning the Merger and the other Transactions, including the following
(not necessarily in order of relative importance):
-
-
the fact that the Closing Amount, while providing relative certainty of value, would not allow Corium's stockholders to participate in the
possible growth and profits of Corium following the completion of the Transactions;
-
-
the CVR Payment Event necessary to trigger payment under the CVR Agreement might not be achieved within the time period described therein;
-
-
the CVRs will not be freely transferable, subject to limited exceptions described in the CVR Agreement, and will not be registered with the SEC
or listed on any securities exchange;
-
-
the non-solicitation provisions of the Merger Agreement that restrict Corium's ability to solicit or, subject to certain exceptions, engage in
discussions or negotiations with third parties regarding a proposal to acquire Corium, and the fact that, upon termination of the Merger Agreement under certain specified circumstances, Corium will be
required to pay a termination fee of $19 million, which could have the effect of discouraging alternative proposals for a business combination with Corium or adversely affect the valuation that
might be proposed by a third party;
-
-
the costs involved in connection with entering into and completing the Transactions and related actions, the time and effort of Corium's
management and certain other employees required to complete the Transactions and the related actions, and the related disruptions or potential disruptions to Corium's business operations and future
prospects, including its relationships with its employees, suppliers and partners and others that do business or may do business in the future with Corium;
-
-
the terms of the Merger Agreement, including the operational restrictions imposed on Corium between signing and closing (which may delay or
prevent Corium from undertaking business opportunities that may arise pending the completion of the Transactions or any other action Corium would otherwise take with respect to the operations of
Corium absent the pending Merger);
-
-
the risk of a delay in receiving, or a failure to receive, the required regulatory clearances for the Transactions;
-
-
the potential stockholder and other lawsuits that may be filed in connection with the Merger Agreement and the contemplated Transactions;
-
-
the absence of assurance that all conditions to the parties' obligations, including with respect to required antitrust approvals, to complete
the Offer or the Merger will be satisfied;
34
Table of Contents
-
-
the fact that the consideration paid in the Transactions would be taxable to Corium's stockholders that are U.S. holders for U.S. federal
income tax purposes; and
-
-
the risk that the proposed Transactions might not be completed and the effect of a resulting public announcement of the termination of the
Merger Agreement on:
-
-
the market price of Corium's common stock, which could be adversely affected by many factors, including (1) the reason the
Merger Agreement was terminated and whether such termination results from factors adversely affecting Corium, (2) the possibility that the marketplace would consider Corium to be an
unattractive acquisition candidate, and (3) the possible sale of Shares of Corium's common stock by short-term investors following the announcement of termination of the Merger Agreement;
-
-
Corium's operating results, particularly in light of the costs incurred in connection with the Transactions, including the
potential requirement to pay a termination fee;
-
-
the ability to attract and retain key personnel and other employees; and
-
-
the relationships with Corium's employees, suppliers, partners and others that do business or may do business in the future with
Corium.
During
its consideration of the Merger Agreement and the other Transactions, the Board also was aware of the fact that some of Corium's directors and executive officers have interests in
the Merger that differ from or are additive to their interests as those of Corium's stockholders generally, which interests are described in the section entitled
"
Item 3. Past Contacts, Transactions, Negotiations and AgreementsArrangements with Current Executive Officers and Directors of
Corium
."
The
foregoing discussion is not meant to be exhaustive, but summarizes the material factors considered by the Board in its consideration of the Merger Agreement, the Offer, the Merger
and the other Transactions. After considering these and other factors, the Board concluded that the potential benefits of the Merger Agreement, the Offer, the Merger and the other Transactions
outweighed the uncertainties and risks. In view of the variety of factors considered by the Board and the complexity of these factors, the Board did not find it practicable to, and did not, quantify
or otherwise assign relative weights to the foregoing factors in reaching its determination and recommendations. Moreover, each member of the Board applied his or her own personal business judgment to
the process and may have assigned different weights to different factors. The Board unanimously adopted and approved the Merger Agreement, the Offer, the Merger and the other Transactions, and
recommended that Corium's stockholders tender their Shares in the Offer.
Executive Officer and Director Arrangements Following the Merger
As of the date of the Merger Agreement and as of the date of this Schedule 14D-9, none of Corium's current directors or executive
officers have entered into, or committed to enter into, any arrangements or other understandings with Parent, Merger Sub or their respective affiliates regarding continued service with the Surviving
Corporation or any of its subsidiaries from and after the Effective Time. It is possible that Parent, Merger Sub or their respective affiliates may enter into employment or other arrangements with
Corium's management in the future.
Opinion of Corium's Financial Advisor
Corium retained Guggenheim Securities to provide it with financial advisory services and a financial opinion in connection with a potential sale
of control strategic transaction. In selecting Guggenheim Securities as its financial advisor, the Board considered that, among other things, Guggenheim Securities is an internationally recognized
investment banking, financial advisory and securities firm whose senior professionals have substantial experience advising companies in, among
35
Table of Contents
other
industries, the biopharmaceutical industry. Guggenheim Securities, as part of its investment banking, financial advisory and capital markets businesses, is regularly engaged in the valuation and
financial assessment of businesses and securities in connection with mergers and acquisitions, recapitalizations, spin-offs/split-offs, restructurings, securities offerings in both the private and
public capital markets and valuations for corporate and other purposes. At the meeting of the Board on October 11, 2018, Guggenheim Securities rendered to the Board its oral opinion, which
opinion was subsequently confirmed by delivery of a written opinion, dated October 11, 2018, to the Board, to the effect that, as of the date of the opinion and based on and subject to the
matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken as set forth in the written opinion, the Offer Price to be
received in connection with the Transactions was fair, from a financial point of view, to the stockholders of Corium (the "
Fairness Opinion
").
The full text of the written opinion of Guggenheim Securities to the Board, dated as of October 11, 2018, which sets forth the matters considered, the
procedures followed, the assumptions made and
other various limitations of and qualifications to the review undertaken by Guggenheim Securities, is attached as Annex A to this Schedule 14D-9 and is incorporated by reference in this
Schedule 14D-9 in its entirety. The summary of the opinion of Guggenheim Securities in this Schedule 14D-9 is qualified in its entirety by reference to the full text of the written
opinion. You are encouraged to read Guggenheim Securities' opinion, this section, and the summary of Guggenheim Securities' opinion below carefully and in their entirety. Guggenheim Securities'
opinion is directed to the Board, in its capacity as such, and addresses only the fairness, from a financial point of view and as of the date of such opinion, of the Offer Price to the stockholders of
Corium to the extent expressly specified in such opinion and did not address any other aspects or implications of the Transactions. Guggenheim Securities' opinion was not intended to, and does not,
constitute advice or a recommendation to any holder of the Shares as to whether to tender such Shares pursuant to the Offer or how to vote or act in connection with the Transactions or
otherwise.
Overview
The Board retained Guggenheim Securities as its financial advisor in connection with a potential sale of control strategic transaction involving
Corium and any potential counterparty. In selecting Guggenheim Securities as its financial advisor, the Board considered that, among other things, Guggenheim Securities is an internationally
recognized investment banking, financial advisory and securities firm whose senior professionals have substantial experience advising companies in, among other industries, the biopharmaceutical
industry. Guggenheim Securities, as part of its investment banking, financial advisory and capital markets businesses, is regularly engaged in the valuation and financial assessment of businesses and
securities in connection with mergers and acquisitions, recapitalizations, spin-offs/split-offs, restructurings, securities offerings in both the private and public capital markets and valuations for
corporate and other purposes.
At
the October 11, 2018 meeting of the Board, Guggenheim Securities rendered an oral opinion, which was confirmed by delivery of a written opinion, to the Board to the effect
that, as of October 11, 2018, and based on and subject to the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review
undertaken, the Offer Price to be received in connection with the Transactions was fair, from a financial point of view, to the stockholders of Corium.
This
description of Guggenheim Securities' opinion is qualified in its entirety by the full text of the written opinion, which is attached as Annex A to this Schedule 14D-9
and which you should read carefully and in its entirety. Guggenheim Securities' written opinion sets forth the matters considered, the procedures followed, the assumptions made and various limitations
of and qualifications to the review undertaken by Guggenheim Securities. Guggenheim Securities' written opinion, which was
36
Table of Contents
authorized
for issuance by the Fairness Opinion and Valuation Committee of Guggenheim Securities, is necessarily based on economic, capital markets and other conditions, and the information made
available to Guggenheim Securities, as of the date of such opinion. Guggenheim Securities has no responsibility for updating or revising its opinion based on facts, circumstances or events occurring
after the date of the rendering of the opinion.
In
reading the discussion of Guggenheim Securities' opinion set forth below, you should be aware that such opinion (and, as applicable, any materials provided in connection
therewith):
-
-
was provided to the Board (in its capacity as such) for its information and assistance in connection with its evaluation of the Offer Price;
-
-
did not constitute a recommendation to the Board with respect to the Transactions;
-
-
does not constitute advice or a recommendation to any holder of the Shares as to whether to tender any such Shares pursuant to the Offer or how
to vote or act in connection with the Transactions or otherwise;
-
-
did not address Corium's underlying business or financial decision to pursue the Transactions, the relative merits of the Transactions as
compared to any alternative business or financial strategies that might exist for Corium, the financing of the Transactions by Gurnet, Parent or Merger Sub, or the effects of any other transaction in
which Corium might engage;
-
-
addressed only the fairness, from a financial point of view and as of the date of such opinion, of the Offer Price to the stockholders of
Corium to the extent expressly specified in such opinion;
-
-
expressed no view or opinion as to (i) any other term, aspect or implication of (a) the Transactions (including, without
limitation, the form or structure of the Transactions) or the Merger Agreement or (b) any tender and support agreement, the CVR Agreement or any other agreement, transaction document or
instrument contemplated by the Merger Agreement or to be entered into or amended in connection with the Transactions, (ii) the likelihood or probability of the achievement or satisfaction of
the milestone necessary for the CVR to be paid in accordance with the CVR Agreement or (iii) the fairness, financial or otherwise, of the Transactions to, or of any consideration to be paid to
or received by, the holders of any class of securities (other than as expressly specified in the opinion), creditors or other constituencies of Corium;
-
-
did not address the individual circumstances of specific holders of Corium's securities (including, without limitation, stock options and
warrants) with respect to rights or aspects which may distinguish such holders of Corium's securities (including, without limitation, stock options and warrants) held by such holders; and
-
-
expressed no view or opinion as to the fairness, financial or otherwise, of the amount or nature of any compensation payable to or to be
received by any of Corium's directors, officers or employees, or any class of such persons, in connection with the Transactions relative to the Offer Price or otherwise.
In
the course of performing its reviews and analyses for rendering its opinion, Guggenheim Securities:
-
-
reviewed the Merger Agreement, including the form of the CVR Agreement attached as an annex thereto;
-
-
reviewed certain publicly available business and financial information regarding Corium;
-
-
reviewed certain non-public business and financial information regarding Corium's business and prospects (including, without limitation,
certain unadjusted and probability-adjusted financial
37
Table of Contents
projections
for the years ending December 31, 2018 through December 31, 2037 and certain estimates as to potentially realizable existing net operating loss carryforwards expected to be
utilized by Corium), all as prepared and approved for Guggenheim Securities' use by Corium's senior management;
-
-
discussed with Corium's senior management their strategic and financial rationale for the Transactions as well as their views of Corium's
business, operations, historical and projected financial results, liquidity, funding needs and access to capital and future prospects (including, without limitation, their assumptions as to the
expected amounts, timing and pricing of future issuances of equity in Corium) and the commercial, competitive and regulatory dynamics in the biopharmaceutical sector;
-
-
reviewed the historical prices, trading multiples and trading activity of the Shares;
-
-
reviewed the valuation and financial metrics of certain mergers and acquisitions that Guggenheim Securities deemed relevant in evaluating the
Transactions;
-
-
performed financing-adjusted discounted cash flow analyses based on the probability-adjusted financial projections for Corium and certain other
information, in each case as prepared and approved for Guggenheim Securities' use by Corium's senior management; and
-
-
conducted such other studies, analyses, inquiries and investigations as Guggenheim Securities deemed appropriate.
With
respect to the information used in arriving at its opinion, Guggenheim Securities noted that:
-
-
Guggenheim Securities relied upon and assumed the accuracy, completeness and reasonableness of all industry, business, financial, legal,
regulatory, tax, accounting, actuarial and other information (including, without limitation, any financial projections, other estimates and other forward-looking information) provided by or discussed
with Corium or obtained from public sources, data suppliers and other third parties.
-
-
Guggenheim Securities (i) did not assume any responsibility, obligation or liability for the accuracy, completeness, reasonableness,
achievability or independent verification of, and did not independently verify, any such information (including, without limitation, any financial projections, other estimates and other
forward-looking information), (ii) expressed no view, opinion, representation, guaranty or warranty (in each case, express or implied) regarding the (a) reasonableness or achievability
of any financial projections, other estimates and other forward-looking information or the assumptions upon which they were based or (b) the probability adjustments reflected in such financial
projections and (iii) relied upon the assurances of Corium's senior management that they were unaware of any facts or circumstances that would make such information (including, without
limitation, any financial projections, other estimates and other forward-looking information) incomplete, inaccurate or misleading.
-
-
Specifically, with respect to any (i) financial projections, other estimates and other forward-looking information provided by or
discussed with Corium, (a) Guggenheim Securities was advised by Corium's senior management, and Guggenheim Securities assumed, that such financial projections (including, without limitation,
the probability adjustments reflected therein and the expected development and commercialization of Corium's products and product candidates), other estimates and other forward-looking information
utilized in Guggenheim Securities' analyses had been reasonably prepared on bases reflecting the best currently available estimates and judgments of Corium's senior management and
(b) Guggenheim Securities assumed that such financial projections, other estimates and other forward-looking information had been reviewed by the Board with the understanding that such
information would be used and relied upon by Guggenheim Securities in connection with rendering its opinion and
38
Table of Contents
(ii) financial
projections, other estimates and/or other forward-looking information obtained by Guggenheim Securities from public sources, data suppliers and other third parties, Guggenheim
Securities assumed that such information was reasonable and reliable.
Guggenheim
Securities also noted certain other considerations with respect to its engagement and the rendering of its opinion:
-
-
During the course of its engagement, Guggenheim Securities was asked by the Board to solicit indications of interest from various third parties
regarding a potential transaction with Corium, and Guggenheim Securities considered the results of such solicitation process in rendering its opinion.
-
-
Guggenheim Securities did not perform or obtain any independent appraisal of the assets or liabilities (including, without limitation, any
contingent, derivative or off-balance sheet assets and liabilities) of Corium or any other entity or the solvency or fair value of Corium or any other entity, nor was Guggenheim Securities furnished
with any such appraisals.
-
-
Guggenheim Securities' professionals are not legal, regulatory, tax, consulting, accounting, appraisal or actuarial experts and nothing in
Guggenheim Securities' opinion should be construed as constituting advice with respect to such matters; accordingly, Guggenheim Securities relied on the assessments of Corium's senior management and
Corium's other professional advisors with respect to such matters. Guggenheim Securities did not express any view or render any opinion regarding the tax consequences of the Transactions to Corium or
its stockholders.
-
-
Guggenheim Securities further assumed that:
-
-
in all respects meaningful to its analyses, (i) Corium, Parent and Merger Sub will comply with all terms and provisions of
the Merger Agreement and (ii) the representations and warranties of Corium, Parent and Merger Sub contained in the Merger Agreement were true and correct and all conditions to the obligations
of each party to the Merger Agreement to consummate the Transactions would be satisfied without any waiver, amendment or modification thereof; and
-
-
the Transactions will be consummated in a timely manner in accordance with the terms of the Merger Agreement and in compliance
with all applicable laws, documents and other requirements, without any delays, limitations, restrictions, conditions, waivers, amendments or modifications (regulatory, tax-related or otherwise) that
would have an effect on Corium, Parent or Merger Sub or the Transactions in any way meaningful to Guggenheim Securities' analyses or opinion.
-
-
Guggenheim Securities did not express any view or opinion as to the price or range of prices at which the Shares or other securities or
financial instruments of or relating to Corium may trade or otherwise be transferable at any time, including subsequent to the announcement or consummation of the Transactions.
Summary of Financial Analyses
Overview of Financial Analyses
This "Summary of Financial Analyses" presents a summary of the principal financial analyses performed by Guggenheim Securities and presented to
the Board in connection with Guggenheim Securities' rendering of its opinion. Such presentation to the Board was supplemented by Guggenheim Securities' oral discussion, the nature and substance of
which may not be fully described herein.
39
Table of Contents
Some
of the financial analyses summarized below include summary data and information presented in tabular format. In order to understand fully such financial analyses, the summary data
and tables must be read together with the full text of the summary. Considering the summary data and tables alone could create a misleading or incomplete view of Guggenheim Securities' financial
analyses.
The
preparation of a fairness opinion is a complex process and involves various judgments and determinations as to the most appropriate and relevant financial analyses and the
application of those methods to the particular circumstances involved. A fairness opinion therefore is not readily susceptible to partial analysis or summary description, and taking portions of the
financial analyses set forth below, without considering such analyses as a whole, would in Guggenheim Securities' view create an incomplete and misleading picture of the processes underlying the
financial analyses considered in rendering Guggenheim Securities' opinion.
In
arriving at its opinion, Guggenheim Securities:
-
-
based its financial analyses on various assumptions, including assumptions concerning general business, economic and capital markets conditions
and industry-specific and company-specific factors, all of which are beyond the control of Corium, Parent, Merger Sub and Guggenheim Securities;
-
-
did not form a view or opinion as to whether any individual analysis or factor, whether positive or negative, considered in isolation,
supported or failed to support its opinion;
-
-
considered the results of all of its financial analyses and did not attribute any particular weight to any one analysis or factor; and
-
-
ultimately arrived at its opinion based on the results of all of its financial analyses assessed as a whole and believes that the totality of
the factors considered and the various financial analyses performed by Guggenheim Securities in connection with its opinion operated collectively to support its determination as to the fairness, from
a financial point of view and as of the date of such opinion, of the Offer Price to be received by the stockholders of Corium pursuant to the Transactions to the extent expressly specified in such
opinion.
With
respect to the financial analyses performed by Guggenheim Securities in connection with rendering its opinion:
-
-
such financial analyses, particularly those based on estimates and projections, are not necessarily indicative of actual values or actual
future results, which may be significantly more or less favorable than suggested by these analyses;
-
-
none of the selected precedent merger and acquisition transactions used in the selected premiums paid analysis described below is identical or
directly comparable to the Transactions; however, such transactions were selected by Guggenheim Securities, among other reasons, because they involved target companies which may be considered broadly
similar, for purposes of Guggenheim Securities' financial analyses, to Corium based on Guggenheim Securities' familiarity with the biopharmaceutical industry; and
-
-
such financial analyses do not purport to be appraisals or to reflect the prices at which any securities may trade at the present time or at
any time in the future.
Recap of Implied Transactions Financial Metrics
Based on (i) the Closing Amount of $12.50 per Share and (ii) the combination of the Closing Amount of $12.50 per Share in cash and
an assumed value of $0.39 for the CVR (which reflects adjustment for the probability of success of the FDA approval provided by Corium's senior
40
Table of Contents
management
and an estimate of the time value of money) (the "Adjusted Offer Price"), Guggenheim Securities calculated implied transaction-related statistics as outlined in the table below:
Corium Analysis at Various Prices as of October 10, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Stock
Price
|
|
Closing
Amount
|
|
Adjusted
Offer
Price
|
|
Stock Price
|
|
|
|
|
$
|
8.33
|
|
$
|
12.50
|
|
$
|
12.89
|
|
|
|
|
Metric
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium / (Discount) to Current Stock Price
|
|
$
|
8.33
|
|
|
|
|
|
50.1
|
%
|
|
54.8
|
%
|
Premium / (Discount) to 30-Day Volume Weighted Average Price ("
VWAP
")
|
|
|
9.16
|
|
|
(9.0
|
)%
|
|
36.5
|
|
|
40.8
|
|
% of 52-Week High Stock Price (Intraday)
|
|
|
13.93
|
|
|
59.8
|
|
|
89.7
|
|
|
92.6
|
|
% of 52-Week Low Stock Price (Intraday)
|
|
|
7.17
|
|
|
116.2
|
|
|
174.3
|
|
|
179.8
|
|
Financial Analyses Recap
In evaluating Corium in connection with rendering its opinion, Guggenheim Securities performed various financial analyses which are summarized
in the table below and described in more detail elsewhere herein, including financing-adjusted discounted cash flow analyses. Solely for informational reference purposes, Guggenheim Securities also
reviewed the historical trading price range for the Shares, Wall Street equity research analysts' price targets for Corium's common stock and implied premiums paid or proposed to be paid in selected
precedent specialty pharmaceuticals industry transactions.
Summary of Corium Financial Analyses
|
|
|
|
|
Closing Amount
|
|
$
|
12.50
|
|
Adjusted Offer Price
|
|
|
12.89
|
|
|
|
|
|
|
|
|
|
|
|
Implied Reference
Ranges for
Corium
|
|
Financial Analyses
|
|
Low
|
|
High
|
|
Financing-Adjusted Discounted Cash Flow Analyses
|
|
$
|
9.84
|
|
$
|
12.66
|
|
For Informational Reference Purposes
|
|
|
|
|
|
|
|
Stock Price Range During 52-Week Period Ended October 10, 2018
|
|
|
7.17
|
|
|
13.93
|
|
Wall Street Equity Research Analyst Stock Price Targets
|
|
|
11.06
|
|
|
12.65
|
|
Selected Premiums Paid (1-Day) (25th to 75th percentile)
|
|
|
10.15
|
|
|
13.81
|
|
Selected Premiums Paid (30-Day VWAP) (25th to 75th percentile)
|
|
|
11.41
|
|
|
15.69
|
|
Corium Financing-Adjusted Discounted Cash Flow Analyses
Guggenheim Securities performed stand-alone financing-adjusted discounted cash flow analyses of Corium based on Corium's after-tax unlevered
free cash flows, as adjusted for the projected probabilities of success of obtaining FDA approval by various Corium product candidates, and an estimate of its terminal value at the end of the
projection horizon.
In
performing its financing-adjusted discounted cash flow analyses with respect to Corium:
-
-
Guggenheim Securities utilized the probability-adjusted financial projections provided by Corium's senior management for the years ending
December 31, 2018 through December 31, 2037, taking into account multiple hypothetical equity financings conducted through 2020 with
41
Table of Contents
Guggenheim
Securities' financing-adjusted discounted cash flow analyses resulted in an overall reference range of $9.84 to $12.66 per Share for purposes of evaluating Corium's common
stock on a stand-alone intrinsic-value basis.
Other Financial Reviews and Analyses Solely For Informational Reference Purposes
In order to provide certain context for the financial analyses in connection with its opinion as described above, Guggenheim Securities
undertook various additional financial reviews and analyses as summarized below solely for informational reference purposes. As a general matter, Guggenheim Securities did not consider such additional
financial reviews and analyses to be determinative methodologies for purposes of its opinion.
Corium Stock Price Trading History
Guggenheim Securities reviewed Corium's stock price trading history over various timeframes. Guggenheim Securities indicated that in the 52-week
period ending October 10, 2018, Corium's common stock generally had traded in a range of approximately $7.17 to $13.93 per Share.
Corium Wall Street Equity Research Analyst Stock Price Targets
Guggenheim Securities reviewed selected Wall Street equity research analyst price targets for Corium as published prior to October 10,
2018 (the last complete trading day prior to the Board meeting to consider and approve the Transactions). Guggenheim Securities noted that such Wall Street equity research analyst stock price targets
for Corium's common stock were $12.00 to $14.00 per Share. Using a discount rate of 14.45% (which reflected the midpoint of Guggenheim Securities' estimate of the cost of equity range for Corium's
business), Guggenheim Securities discounted back such Wall Street equity research analysts' stock price targets to arrive at present values of such Wall Street equity research analyst stock price
targets for Corium's common stock of approximately $11.06 to $12.65 per Share.
Guggenheim
Securities noted that Wall Street equity research analyst stock price targets and the present values thereof do not necessarily reflect current market trading prices for
Corium's common stock, and such estimates are subject to various uncertainties, including the future financial performance of Corium and future capital markets conditions.
42
Table of Contents
Premiums Paid in Selected Merger and Acquisition Transactions
Guggenheim Securities reviewed, based on publicly available information, the implied premiums paid or proposed to be paid in connection with 15
selected transactions announced since 2013, with enterprise values between $100 million and $1 billion involving public target companies in the specialty pharmaceutical industry that
Guggenheim Securities deemed relevant for purposes of this analysis. The premiums in this analysis were calculated by comparing the per share acquisition price in each transaction to (i) the
closing price of the target company's common stock on the date one day prior to the date on which the trading price of the target company's common stock was perceived to be affected by the respective
transaction, and (ii) the 30-day VWAP of the target company's common stock ending on such date. Guggenheim Securities noted that applying the range from the 25th percentile to the
75th percentile of the one trading day premiums derived from such transactions of approximately 22% to 66% to Corium's closing stock price on October 10, 2018 (the last complete trading
day prior to the Board meeting to consider and approve the Transactions) indicated an implied reference range of approximately $10.15 to $13.81 per Share. Guggenheim Securities also noted that
applying the range from the 25th percentile to the 75th percentile of the 30-day VWAP premiums
derived from such transactions of approximately 25% to 71% to Corium's 30-day VWAP on October 10, 2018 (the last complete trading day prior to the Board meeting to consider and approve the
Transactions) indicated an implied reference range of approximately $11.41 to $15.69 per Share.
Other Considerations
Except as described in the summary above, Corium did not provide specific instructions to, or place any limitations on, Guggenheim Securities
with respect to the procedures to be followed or factors to be considered in performing its financial analyses or providing its opinion. The type and amount of consideration payable in the
Transactions was determined through negotiations between Corium and Parent and were approved by the Board. The decision to enter into the Merger Agreement was solely that of the Board. Guggenheim
Securities' opinion was just one of the many factors taken into consideration by the Board. Consequently, Guggenheim Securities' financial analyses should not be viewed as determinative of the
decision of the Board with respect to the fairness, from a financial point of view, to the stockholders of Corium of the Offer Price pursuant to the Transactions.
During
the past two years, Guggenheim Securities has not been engaged by Corium to provide financial advisory or other investment banking services with respect to matters unrelated to
the Transactions for which Guggenheim Securities has received or expects to receive compensation, except in connection with Corium's $35 million follow-on offering in 2017, for which Guggenheim
Securities acted as a co-manager and received agreed upon compensation. During the past two years, Guggenheim Securities has not been engaged by Parent or Gurnet to provide financial advisory or other
investment banking services for which Guggenheim Securities received or expects to receive compensation. Guggenheim Securities may seek to provide Corium, Gurnet and Parent and their respective
affiliates with certain financial advisory and investment banking services unrelated to the Transactions in the future, for which services Guggenheim Securities would expect to receive compensation.
Guggenheim
Securities and its affiliates and related entities engage in a wide range of financial services activities for its and their own accounts and the accounts of customers,
including, without limitation: asset, investment and wealth management; insurance services; investment banking, corporate finance, mergers and acquisitions and restructuring; merchant banking; fixed
income and equity sales, trading and research; and derivatives, foreign exchange and futures. In the ordinary course of these activities, Guggenheim Securities and its affiliates and related entities
may (i) provide such financial services to Corium, Gurnet, Parent, other participants in the Transactions and their respective affiliates, investment funds and portfolio companies, for which
services Guggenheim Securities and its affiliates and related entities may have received, and may in the future receive, compensation and (ii) directly
43
Table of Contents
and
indirectly hold long and short positions, trade and otherwise conduct such activities in or with respect to loans, debt and equity securities and derivative products of or relating to Corium,
Gurnet, Parent, other participants in the Transactions and their respective affiliates, investment funds and portfolio companies. Furthermore, Guggenheim Securities and its affiliates and related
entities and its or their respective directors, officers, employees, consultants and agents may have investments in Corium, Gurnet, Parent, other participants in the Transactions and their respective
affiliates, investment funds and portfolio companies.
Consistent
with applicable legal and regulatory guidelines, Guggenheim Securities has adopted certain policies and procedures to establish and maintain the independence of its research
departments and personnel. As a result, Guggenheim Securities' research analysts may hold views, make statements or investment recommendations and publish research reports with respect to Corium,
Gurnet, Parent, other participants in the Transactions and their respective affiliates, investment funds and portfolio companies and the Transactions that differ from the views of Guggenheim
Securities' investment banking personnel.
Certain Unaudited Prospective Financial Information of Corium
Corium does not, as a matter of course, publicly disclose forecasts or projections as to future performance, earnings or other results (with the
exception of limited near-term guidance with respect to total revenue growth and cash resources) due to the inherent unpredictability of projections and their underlying assumptions and estimates.
However, in connection with the Transactions, senior management prepared certain non-public unaudited financial analyses and forecasts as a standalone company but based on an assumption that Corium
self-funded the continued development and self-marketing of all of its pipeline products (and financed this with equity financings), rather than entering into commercial partnering transactions for
those products (the "
Projections
").
The
Projections assumed that Corium itself manufactures, commercializes and distributes the products that are currently under development, without relying on one or more commercial
partners to do so under license from Corium. The Projections also reflected an assessment of, and were risk-adjusted for, the probability of success of each of the products that are currently under
development, including the probability that each of these products successfully completes each stage of their development, is approved by the FDA, and is successfully commercialized. In addition, the
Projections reflected certain financial, operating and commercial assumptions developed solely using the information available to Corium's management at the time the Projections were created. Corium's
management provided the Projections to the Board in connection with its consideration of the Transactions and to Guggenheim Securities in connection with its rendering of its fairness opinion to the
Board and performing its
related financial analysis, as described above under the heading "
Opinion of Corium's Financial Advisor
."
A
summary of the Projections is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
2026
|
|
2027
|
|
2028
|
|
2029
|
|
2030
|
|
2031
|
|
2032
|
|
2033
|
|
2034
|
|
2035
|
|
2036
|
|
2037
|
|
|
|
($mm)
|
|
Net sales
|
|
|
33
|
|
|
44
|
|
|
84
|
|
|
144
|
|
|
209
|
|
|
299
|
|
|
322
|
|
|
346
|
|
|
374
|
|
|
395
|
|
|
416
|
|
|
439
|
|
|
463
|
|
|
488
|
|
|
515
|
|
|
543
|
|
|
573
|
|
|
605
|
|
|
639
|
|
EBIT
|
|
|
(50
|
)
|
|
(79
|
)
|
|
(54
|
)
|
|
8
|
|
|
69
|
|
|
146
|
|
|
166
|
|
|
187
|
|
|
210
|
|
|
229
|
|
|
247
|
|
|
266
|
|
|
286
|
|
|
307
|
|
|
330
|
|
|
354
|
|
|
379
|
|
|
406
|
|
|
435
|
|
EBITDA(1)
|
|
|
(44
|
)
|
|
(71
|
)
|
|
(46
|
)
|
|
16
|
|
|
77
|
|
|
155
|
|
|
175
|
|
|
196
|
|
|
220
|
|
|
240
|
|
|
258
|
|
|
277
|
|
|
298
|
|
|
320
|
|
|
343
|
|
|
368
|
|
|
394
|
|
|
422
|
|
|
451
|
|
-
(1)
-
EBITDA
consists of earnings before interest income/expense, taxes, and depreciation and amortization, and excludes the effect of stock-based compensation expense.
EBITDA is a non-GAAP financial measure and is not intended to represent, or to be used, as a substitute for operating income and net income as a measure of operating performance or for cash flows from
operations as a measure of liquidity.
44
Table of Contents
In addition, at the direction of senior management, Guggenheim Securities calculated from the Projections after-tax unlevered free cash flows as set forth below
for use in its financing-adjusted discounted cash flow analysis, as well as, at the direction of senior management, separate after-tax free cash flows for Corium's specialty pharmaceuticals business
and its contract manufacturing business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
2026
|
|
2027
|
|
2028
|
|
2029
|
|
2030
|
|
2031
|
|
2032
|
|
2033
|
|
2034
|
|
2035
|
|
2036
|
|
2037
|
|
|
|
($mm)
|
|
Unlevered Free Cash Flow(1)
|
|
|
(47
|
)
|
|
(80
|
)
|
|
(57
|
)
|
|
1
|
|
|
61
|
|
|
133
|
|
|
150
|
|
|
153
|
|
|
153
|
|
|
168
|
|
|
182
|
|
|
196
|
|
|
210
|
|
|
226
|
|
|
243
|
|
|
260
|
|
|
279
|
|
|
299
|
|
|
320
|
|
Free Cash Flow from Specialty Pharmaceuticals(1)
|
|
|
(41
|
)
|
|
(76
|
)
|
|
(56
|
)
|
|
(0
|
)
|
|
61
|
|
|
132
|
|
|
149
|
|
|
152
|
|
|
152
|
|
|
167
|
|
|
181
|
|
|
194
|
|
|
|
(*)
|
|
|
(*)
|
|
|
(*)
|
|
|
(*)
|
|
|
(*)
|
|
|
(*)
|
|
319
|
|
Free Cash Flow from Contract Manufacturing(1)
|
|
|
(6
|
)
|
|
(5
|
)
|
|
(1
|
)
|
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
|
(*)
|
|
|
(*)
|
|
|
(*)
|
|
|
(*)
|
|
|
(*)
|
|
|
(*)
|
|
1
|
|
-
(1)
-
Unlevered
Free Cash Flow consists of EBIT minus tax expense, non-cash expenses (such as depreciation, amortization, and stock compensation expense) and capital
expenditures, and adjusted for changes in net working capital. Unlevered Free Cash Flow is a non-GAAP financial measure and is not intended to represent, or to be used, as a substitute for operating
income and net income as a measure of operating performance or for cash flows from operations as a measure of liquidity.
-
(*)
-
Free
cash flows for Corium's specialty pharmaceuticals business and its contract manufacturing business were not reviewed by Corium's Board.
The
summary of the Projections is included in this Schedule 14D-9 solely to give Corium's stockholders access to certain financial projections that were made available to the
Board and Guggenheim Securities in connection with the rendering of its fairness opinion to the Board, and is not being included in this Schedule 14D-9 to influence a Corium stockholder's
decision whether to tender Shares in the Offer or for any other purpose. The Projections differ from published analyst estimates and forecasts. The inclusion of the Projections in this
Schedule 14D-9 should not be regarded as an indication that Corium or any of its affiliates, advisors or representatives considered or considers the Projections to be necessarily predictive of
actual future events, and the Projections should not be relied upon as such. Neither Corium nor any of its respective affiliates, advisors, officers, directors or representatives has made or makes any
representation to any of Corium's stockholders or any other person regarding the ultimate performance of Corium compared to the information contained in the Projections or can give any assurance that
actual results will not differ from the Projections. Corium has made no representation to Parent or Merger Sub in the Merger Agreement or otherwise concerning the Projections, nor were the Projections
provided to Parent or Merger Sub prior to entering into the Merger Agreement. The financial data provided in the tables set forth above has not been updated to reflect senior management's current
views of Corium or Corium's future financial performance and should not be treated as guidance with respect to projected results for 2018 or any other period. Corium does not intend to make publicly
available any update or other revision to the Projections, except as otherwise required by law.
The
Projections were prepared by senior management for internal use and were not prepared with a view toward public disclosure. Accordingly, they do not necessarily comply with published
guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for the preparation and presentation of financial forecasts, or generally accepted
accounting principles ("
GAAP
"). Neither Corium's independent registered public accounting firm, nor any other independent accountants, have audited,
reviewed, compiled or performed any procedures with respect to the Projections or expressed any opinion or any form of assurance related thereto. In addition, certain of the projected financial
information set forth above, such as EBITDA and Unlevered Free Cash Flow, are non-GAAP financial measures.
Non-GAAP financial measures should not be considered as an
alternative to operating income or net income as measures of operating performance, or as an alternative to cash flows as a measure of liquidity.
Non-GAAP financial measures
should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Corium may not be comparable to
similarly titled
amounts used by other companies. No reconciliation of non-GAAP measures in the Projections to GAAP measures was created or used in connection with the Transactions.
Modeling
and forecasting the future cash flows associated with the development and commercialization of products in research, pre-clinical and clinical stages are a highly speculative
endeavor. The Projections, while presented with numerical specificity, were based on numerous
45
Table of Contents
variables
and assumptions that are inherently uncertain and necessarily involve judgments with respect to, among other things, product revenue growth, product launch, commercialization and
development, estimated costs and expenses, likelihood of success in successive stages of clinical development, pricing, competition, market share, regulatory approvals, and future economic,
competitive and regulatory conditions, all of which are difficult or impossible to predict and many of which are beyond Corium's control. The Projections were developed under the assumption of
continued standalone operation without a commercial partner with respect to products that are currently under development, and did not give effect to any changes or expenses as a result of the
Transactions or any effects of the Transactions (including the announcement of the Transactions). The Projections reflect assumptions as to certain business decisions that are subject to change. In
addition, given that the Projections cover multiple years, by their nature, they become subject to greater uncertainty with each successive year.
Important
factors that may affect actual results and result in the Projections not being achieved include the future pricing and reimbursement environment for Corium's therapeutic
products; new competitors and technologies not currently foreseen; risks associated with product development; risks associated with clinical trials; risks relating to actions of regulatory
authorities; risks related to reliance on third parties for supply of raw materials and distribution of Corium's products and product candidates; the outcome of any significant legal proceedings;
risks associated with doing business in international and emerging markets; risks associated with current and potential future healthcare reforms; failure to identify and execute on business
development and research and development opportunities; Corium's dependence on relationships with collaborators and other third parties for revenue and other aspects of its business; failure to comply
with legal and regulatory requirements affecting Corium's business; and other risk factors described in Corium's Annual Report on Form 10-K for the fiscal year ended September 30, 2017,
quarterly reports on Form 10-Q, current reports on Form 8-K and subsequent reports.
In
addition, the Projections may be affected by Corium's ability to achieve strategic goals, objectives and targets over the applicable period, including the ability to raise substantial
amounts in financing transactions to fund the commercialization of Corium's products under development. The Projections also reflect assumptions that are subject to change and are susceptible to
multiple interpretations and periodic revisions based on actual results, revised prospects for Corium's business, competitive environment, changes in general business or economic conditions, or any
other transaction or event that has occurred or that may occur and that was not anticipated when the Projections were prepared.
The Projections do not take into account any circumstances, transactions or events occurring after the dates on which the Projections were prepared. Accordingly, actual results will differ, and may
differ materially, from those contained in the Projections. There can be no assurance that the financial results in the Projections will be realized, or that future actual financial results will not
materially vary from those in the Projections. The Projections are forward-looking statements, and are expressly qualified in their entirety by the risks and uncertainties identified above and the
cautionary statements contained in Corium's Annual Report on Form 10-K for the fiscal year ended September 30, 2017, quarterly reports on Form 10-Q, current reports on
Form 8-K and subsequent reports. Please refer to the discussion entitled "
Item 8. Additional InformationForward Looking
Statements
."
In light of the foregoing factors and the uncertainties inherent in the Projections, Corium's stockholders and investors are cautioned not
to place undue, if any, reliance on the Projections.
CORIUM
DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE
EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING SUCH PROJECTIONS ARE NO LONGER APPROPRIATE.
46
Table of Contents
Intent to Tender
To the knowledge of Corium, each executive officer and director of Corium currently intends to tender all of his or her Shares in the Offer.
Item 5. Persons/Assets Retained, Employed, Compensated or Used
Pursuant to the terms of Guggenheim Securities' engagement, Corium has agreed to pay Guggenheim Securities a cash transaction fee (based on a
percentage of the aggregate value of the Transactions) upon consummation of the Transactions, which cash transaction fee currently is estimated to be approximately $8 million, which may
increase if the CVR Payment Event occurs and payment is made under the CVRs. In connection with Guggenheim Securities' engagement, Corium has previously paid Guggenheim Securities a cash milestone fee
of $750,000 that became payable upon
delivery of Guggenheim Securities' opinion, which will be credited against the foregoing cash transaction fee. In addition, Corium has agreed to reimburse Guggenheim Securities for certain expenses
and to indemnify Guggenheim Securities against certain liabilities arising out of its engagement. See "
Item 4. The Solicitation or RecommendationBackground
of the Merger Agreement; Reasons for the RecommendationBackground of the Merger
" and "
Opinion of Corium's Financial
Advisor
" for additional information related to Guggenheim Securities' retention as Corium's financial advisor, which is hereby incorporated by reference into this
Item 5.
Neither
Corium nor any person acting on its behalf has or currently intends to employ, retain or compensate any person to make solicitations or recommendations to the stockholders of
Corium on its behalf with respect to the Transactions or related matters.
Item 6. Interest in Securities of the Subject Company
No transactions with respect to the Shares have been effected by Corium or, to the knowledge of Corium after making reasonable inquiry, by any
of its executive officers, directors, affiliates or subsidiaries during the 60 days prior to the date of this Schedule 14D-9.
Item 7. Purposes of the Transaction and Plans or Proposals
Except as indicated in this Schedule 14D-9 (including the exhibits to this Schedule 14D-9 or incorporated in this
Schedule 14D-9 by reference), Corium is not currently undertaking or engaged in any negotiations in response to the Offer that relate to, or would result in, (1) a tender offer for or
other acquisition of Corium's securities by Corium, any subsidiary of Corium or any other person; (2) any extraordinary transaction, such as a merger, reorganization or liquidation, involving
Corium or any subsidiary of Corium; (3) any purchase, sale or transfer of a material amount of assets of Corium or any subsidiary of Corium; or (4) any material change in the present
dividend rate or policy, indebtedness or capitalization of Corium.
Except
as indicated in this Schedule 14D-9 (including the exhibits to this Schedule 14D-9 or incorporated in this Schedule 14D-9 by reference), there are no
transactions, board resolutions, agreements in principle or signed contracts that were entered into in response to the Offer that relate to, or would result in, one or more of the matters referred to
in the preceding paragraph.
Item 8. Additional Information
The information contained in all of the exhibits to this Schedule 14D-9 referred to in Item 9 below is incorporated herein by
reference in its entirety.
The
information set forth under the caption "
Item 3. Past Contacts, Transactions, Negotiations and AgreementsArrangements with Current
Executive Officers and Directors of Corium
" is incorporated herein by reference.
47
Table of Contents
Appraisal Rights
Holders of Shares will not have appraisal rights in connection with the Offer. However, if the Offer is successful and the Merger is
consummated, holders of Shares immediately prior to the Effective Time who have not validly tendered such Shares in the Offer (or who have validly tendered but subsequently validly withdrawn the
tender, and not otherwise waived their appraisal rights) and who otherwise comply with the applicable procedures under Section 262 of the DGCL will be entitled to an appraisal of the "fair
value" of their Shares in accordance with Section 262 of the DGCL.
The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of
Section 262 of the DGCL, which is attached to this Schedule 14D-9 as Annex B. All references in Section 262 of the DGCL and in this summary to a "stockholder" are to the
record holder of Shares immediately prior to the Effective Time as to which appraisal rights are asserted. A person having a beneficial interest in Shares held of record in the name of another person,
such as a broker or nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights. The following summary does
not constitute any legal or other advice nor does it constitute a recommendation that stockholders exercise appraisal rights under Section 262. Stockholders should carefully review the full
text of Section 262 of the DGCL as well as the information discussed below.
Any
stockholder contemplating the exercise of such appraisal rights should review carefully the provisions of Section 262 of the DGCL, which is attached hereto as Annex B,
particularly the procedural steps required to perfect such rights.
Failure to follow the steps required by Section 262 of the DGCL for perfecting appraisal rights may
result in the loss of such rights.
Under
Section 262 of the DGCL, where a merger is approved under Section 251(h) of the DGCL, either a constituent corporation before the Effective Time, or the surviving
corporation within 10 days thereafter, shall notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights that appraisal
rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of Section 262.
This
Schedule 14D-9 constitutes the formal notice of appraisal rights under Section 262 of the DGCL.
Any holder of Shares who wishes to exercise such appraisal rights
or who wishes to preserve his, her or its right to do so, should review the following discussion and Annex B carefully because failure to timely and properly comply with the procedures
specified may result in the loss of appraisal rights under the DGCL.
Any stockholder wishing to exercise appraisal rights is urged to consult legal counsel before attempting to exercise such rights.
Stockholders who sell Shares in the Offer will not be entitled to exercise appraisal rights with respect thereto but rather will receive the Offer Price, subject
to the terms and conditions of the Merger Agreement.
This summary of appraisal rights under the DGCL is not complete and is qualified in its entirety by reference to Section 262 of the DGCL, which is attached
hereto as Annex B.
Under
the DGCL, if the Merger is effected, holders of Shares immediately prior to the Effective Time who (1) did not tender such Shares in the Offer; (2) follow the
procedures set forth in Section 262 of the DGCL; (3) continuously hold such Shares from the date on which the written demand for appraisal is made through the Effective Time; and
(4) do not thereafter withdraw their demand for appraisal of such Shares or otherwise lose, waive or fail to perfect their appraisal rights will be entitled to have such Shares appraised by the
Delaware Court of Chancery and to receive payment of the "fair value" of such Shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with
interest, if any, to be paid upon the amount determined to
48
Table of Contents
be
the fair value. The "fair value" as determined by such court could be greater than, less than or the same as the Offer Price. At any time before the entry of judgment in the proceedings, the
Surviving Corporation may pay to each holder of Shares entitled to appraisal an amount in cash, in which case interest shall accrue thereafter only upon the sum of (1) the difference, if any,
between the amount so paid and the fair value of the Shares as determined by the Delaware Court of Chancery and (2) interest theretofore accrued, unless paid at that time.
Section 262
of the DGCL sets forth the procedures stockholders entitled to appraisal must follow to have their Shares appraised by the Delaware Court of Chancery and to receive
payment in cash of the "fair value" of such Shares as determined by the Delaware Court of Chancery. The statutory rights of appraisal granted by Section 262 of the DGCL are subject to
compliance with the procedures set forth in Section 262 of the DGCL. If a stockholder fails to timely and properly comply with the requirements of Section 262 of the DGCL, any appraisal
rights may be lost. If a stockholder elects to demand appraisal of his, her or its Shares under Section 262 of the DGCL,
the stockholder must satisfy each of the
following conditions
:
-
-
within the later of the consummation of the Offer and 20 days after the mailing of this Schedule 14D-9, deliver to Corium a
written demand for appraisal of Shares held, which demand must reasonably inform Corium of the identity of the stockholder and that the stockholder is demanding appraisal;
-
-
not tender the stockholder's Shares in the Offer; and
-
-
continuously hold of record the Shares from the date on which the written demand for appraisal is made through the Effective Time.
In
addition, because immediately before the Merger the Shares will be listed on a national securities exchange, the Delaware Court of Chancery shall dismiss the proceedings as to all
holders of Shares who are otherwise entitled to appraisal rights unless (1) the total number of Shares entitled to appraisal exceeds 1% of the outstanding Shares eligible for appraisal,
(2) the value of the consideration provided
in the Merger for such total number of Shares exceeds $1 million or (3) the Merger was approved pursuant to Section 253 or Section 267 of the DGCL.
If
the Merger is consummated pursuant to Section 251(h) of the DGCL, the Surviving Corporation will deliver an additional notice of the effective date of the Merger on or within
10 days after the Effective Time to those stockholders of Corium who made a written demand for appraisal in accordance with Section 262 of the DGCL, as required by
Section 262(d)(2) of the DGCL. Only stockholders who have submitted a written demand for appraisal in accordance with Section 262 and are entitled to appraisal rights will be entitled to
receive such notice of the effective date of the Merger.
All
written demands for appraisal should be addressed to:
The
written demand for appraisal must be executed by or for the record holder of Shares. If the Shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or
custodian, execution of the demand must be made in that capacity, and if the Shares are owned of record by more than one person, such as in a joint tenancy or tenancy in common, the demand must be
executed by or for all joint owners. An authorized agent, including one of two or more joint owners, may execute the demand for appraisal for a holder of record. However, the agent must identify the
record owner(s) and
49
Table of Contents
expressly
disclose the fact that, in executing the demand, the agent is acting as agent for the record owner(s).
A
beneficial owner of Shares held in "street name" who wishes to exercise appraisal rights should take such actions as may be necessary to ensure that a timely and proper demand for
appraisal is made by the record holder of the Shares. If Shares are held through a brokerage firm, bank or other nominee who in turn holds the Shares through a central securities depository nominee,
such as Cede & Co., a demand for appraisal of such Shares must be made by or on behalf of the depository nominee, and
must identify the depository nominee as the record holder. Any beneficial owner who wishes to exercise appraisal rights and holds Shares through a nominee holder is responsible for ensuring that the
demand for appraisal is timely made by the record holder. The beneficial holder of the Shares should instruct the nominee holder that the demand for appraisal should be made by the record holder of
the Shares, which may be a central securities depository nominee if the Shares have been so deposited.
A
record holder, such as a broker, bank, fiduciary, depository or other nominee, who holds Shares as a nominee for several beneficial owners may exercise appraisal rights with respect to
the Shares held for one or more beneficial owners while not exercising such rights with respect to the Shares held for other beneficial owners. In such case, the written demand must set forth the
number of Shares covered by the demand. Where the number of Shares is not expressly stated, the demand will be presumed to cover all Shares held in the name of the record owner.
Within
120 days after the Effective Time, but not thereafter, the Surviving Corporation, or any holder of Shares who has complied with Section 262 of the DGCL and is
entitled to appraisal rights under Section 262 of the DGCL, may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery demanding a determination of the fair
value of the Shares held by all holders who did not tender such Shares in the Offer and properly demanded appraisal of such Shares in accordance with Section 262 of the DGCL. If no such
petition is filed within that 120-day period, then appraisal rights will be lost for all holders of Shares who had previously demanded appraisal of their Shares. The Surviving Corporation is under no
obligation to, and has no present intention to, file a petition and holders should not assume that the Surviving Corporation will file a petition or that it will initiate any
negotiations with respect to the fair value of the Shares. Accordingly, it is the obligation of the holders of Shares to initiate all necessary action to perfect their appraisal rights in respect of
the Shares within the period prescribed in Section 262 of the DGCL.
Within
120 days after the Effective Time, any holder of Shares who has complied with the requirements of Section 262 of the DGCL will be entitled, upon written request, to
receive from the Surviving Corporation a statement setting forth the aggregate number of Shares not tendered into the Offer and with respect to which demands for appraisal have been received and the
aggregate number of holders of such Shares. Such statement must be mailed within 10 days after a written request therefor has been received by the Surviving Corporation or within 10 days
after the expiration of the period for delivery of demands for appraisal, whichever is later.
Notwithstanding
the requirement that a demand for appraisal must be made by or on behalf of the record owner of the Shares, a person who is the beneficial owner of Shares held either in
a voting trust or by a nominee on behalf of such person, and as to which demand has been properly made and not effectively withdrawn, may, in such person's own name, file a petition for
appraisal or request from the Surviving Corporation the statement described in the preceding paragraph.
Upon
the filing of such petition by any such holder of Shares, service of a copy thereof must be made upon the Surviving Corporation, which will then be obligated within 20 days
after such service to file with the office of the Register in Chancery (the "
Delaware Register in Chancery
") a duly verified list
(the "
Verified List
") containing the names and addresses of all stockholders who have demanded payment for their Shares and with whom agreements as to
the value of their Shares has not been
50
Table of Contents
reached.
Upon the filing of any such petition, the Delaware Court of Chancery may order that notice of the time and place fixed for the hearing on the petition be mailed to the Surviving Corporation
and all of the stockholders shown on the Verified List at the addresses stated therein. Such notice will also be published at least one week before the day of the hearing in a newspaper of general
circulation published in the City of Wilmington, Delaware, or in another publication determined by the Delaware Court of Chancery. The costs of these notices are borne by the Surviving Corporation.
After
notice to the stockholders as required by the Delaware Court of Chancery, the Court of Chancery is empowered to conduct a hearing on the petition to determine those stockholders
who have complied with Section 262 of the DGCL and who have become entitled to appraisal rights thereunder. The Delaware Court of Chancery may require the stockholders who demanded payment for
their Shares to submit their stock certificates to the Delaware Register in Chancery for notation thereon of the pendency of the appraisal proceeding and, if any stockholder fails to comply with the
direction, the Delaware Court of Chancery may dismiss the proceedings as to that stockholder. Accordingly, stockholders exercising their appraisal rights are cautioned to retain their stock
certificates, pending resolution of the appraisal proceedings.
After
the Delaware Court of Chancery determines which stockholders are entitled to appraisal, the appraisal proceeding will be conducted in accordance with the rules of the Delaware
Court of Chancery, including any rules specifically governing appraisal proceedings. Through the appraisal proceeding, the Delaware Court of Chancery will determine the fair value of the Shares,
exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. Unless the
Delaware Court of Chancery in its discretion determines otherwise for good cause shown, interest from the Effective Time through the date of payment of the judgment will be compounded quarterly and
will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time and the date of payment of the
judgment. At any time before the entry of judgment in the proceedings, the Surviving Corporation may pay to each holder of Shares entitled to appraisal an amount in cash, in which case interest shall
accrue thereafter only upon the sum of (1) the difference, if any, between the amount so paid and the fair value of the Shares as determined by the Delaware Court of Chancery and
(2) interest theretofore accrued, unless paid at that time.
Stockholders
considering appraisal should be aware that the fair value of their Shares as so determined could be more than, the same as or less than the Offer Price. No representation is
made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery, and stockholders should recognize that such an appraisal could result in a determination of a
value higher
or lower than, or the same as, the Offer Price. Parent and Corium reserve the right to assert, in any appraisal proceeding, that for purposes of Section 262 of the DGCL, the fair value of a
Share is less than the Offer Price.
Upon
application by the Surviving Corporation or by any holder of Shares entitled to participate in the appraisal proceeding, the Delaware Court of Chancery may, in its discretion,
proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Any holder of Shares whose name appears on the Verified List and, if such Shares are
represented by certificates and if so required, who has submitted such stockholder's certificates of stock to the Delaware Register in Chancery, may participate fully in all proceedings until it is
finally determined that such stockholder is not entitled to appraisal rights. The Delaware Court of Chancery will direct the payment of the fair value of the Shares, together with interest, if any, by
the Surviving Corporation to the stockholders entitled thereto. Payment will be so made to each such stockholder, in the case of holders of uncertificated stock, forthwith, and in the case of holders
of Shares represented by certificates, upon the surrender to the Surviving Corporation of the certificate(s) representing such stock. The Delaware Court of Chancery's decree may be enforced as other
decrees in such court may be enforced.
51
Table of Contents
The
costs of the action (which do not include attorneys' fees or the fees and expenses of experts) may be determined by the Delaware Court of Chancery and taxed upon the parties as the
Delaware Court of Chancery deems equitable. Upon application of a stockholder, the Delaware Court of Chancery may order all or a portion of the expenses incurred by a stockholder in connection with an
appraisal proceeding, including, without limitation, reasonable attorneys' fees and the fees and expenses of experts utilized in the appraisal proceeding, to be charged pro rata to the value of all
the Shares entitled to appraisal. In the absence of an order, each party bears its own expenses.
Any
stockholder who has duly demanded and perfected appraisal rights for Shares in compliance with Section 262 of the DGCL will not, after the Effective Time, be entitled to vote
such Shares for any purpose or be entitled to the payment of dividends or other distributions thereon, except dividends or other distributions payable to holders of record of Shares as of a date or
time prior to the Effective Time.
At
any time within 60 days after the Effective Time, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party will have the right
to withdraw such stockholder's demand for appraisal and to accept the terms offered in the Merger. After this period, the stockholder may withdraw such stockholder's demand for appraisal only with the
written approval of the Surviving Corporation. If no petition for appraisal is filed with the Delaware Court of Chancery within 120 days after the Effective Time, stockholders' rights to
appraisal shall cease, and all holders of Shares will be entitled to receive the Offer Price. Inasmuch as Corium has no obligation to file such a petition and has no present intention to do so, any
holder of Shares who desires such a petition to be
filed is advised to file it on a timely basis. Any stockholder may withdraw such stockholder's demand for appraisal by delivering to Corium a written withdrawal of its demand for appraisal and
acceptance of the Offer Price, except that (1) any such attempt to withdraw made more than 60 days after the Effective Time will require written approval of the Surviving Corporation;
and (2) no appraisal proceeding in the Delaware Court of Chancery shall be dismissed as to any stockholder without the approval of the Delaware Court of Chancery, and such approval may be
conditioned upon such terms as the Delaware Court of Chancery deems just. However, notwithstanding the foregoing, any stockholder who has not commenced an appraisal proceeding or joined that
proceeding as a named party may withdraw such stockholder's demand for appraisal and accept the terms offered upon the Merger within 60 days after the Effective Time.
If
any stockholder who demands appraisal of Shares under Section 262 of the DGCL fails to perfect, successfully withdraws or loses such holder's right to appraisal, the
stockholder's Shares will be deemed to have been converted at the Effective Time into the right to receive the Offer Price therefor.
The
foregoing summary of the rights of Corium's stockholders to seek appraisal under Delaware law does not purport to be a complete statement of the procedures to be followed by the
stockholders of Corium desiring to exercise any appraisal rights available thereunder and is qualified in its entirety by reference to Section 262 of the DGCL. The proper exercise of appraisal
rights requires adherence to the applicable provisions of the DGCL. A copy of Section 262 of the DGCL is included as Annex B to this Schedule 14D-9.
Anti-Takeover Statute
As a Delaware corporation, Corium is subject to Section 203 of the DGCL
("
Section 203
"). In general, Section 203 restricts an "interested stockholder" (including a person who has the right to acquire 15% or
more of a corporation's outstanding voting stock) from engaging in a "business combination" (defined to include mergers and certain other actions) with a Delaware corporation for three years following
the time such person became an interested stockholder unless: (1) before such person became an interested stockholder, the board of directors of the corporation approved the transaction in
which the interested stockholder became an interested stockholder or approved the
52
Table of Contents
business
combination; (2) upon consummation of the transaction which resulted in the interested stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of
the
voting stock of the corporation outstanding at the time the transaction commenced (excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the
interested stockholder), the number of shares of outstanding stock held by directors who are also officers and by employee stock plans that do not allow plan participants to determine confidentially
whether to tender shares); or (3) at or following the transaction in which such person became an interested stockholder, the business combination is (a) approved by the board of
directors of the corporation; and (b) authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of the holders of at least
66
2
/
3
% of the outstanding voting stock of the corporation not owned by the interested stockholder. The Board has approved the Offer, including the Offer to Purchase, the Letter of
Transmittal and related documents (including, without limitation, the Merger Agreement) and the other transactions contemplated thereby, including the Merger, for purposes of Section 203, and
Corium believes that such acts and transactions are not subject to the restrictions of Section 203. Further, the Board has exempted Corium from any other "fair price," "control share
acquisition," "business combination" or other similar anti-takeover statute or regulation that may be applicable to the Offer, including the Offer to Purchase, the Letter of Transmittal and related
documents (including, without limitation, the Merger Agreement) and the other transactions contemplated thereby, including the Merger.
Corium
is not aware of any other state takeover laws or regulations that are applicable to the Offer or the Merger and has not attempted to comply with any state takeover laws or
regulations other than as described above. If any "control share acquisition," "fair price," "moratorium" or other anti-takeover applicable law becomes or is deemed to be applicable to Corium, Parent,
the Offer, the Merger, or related documents (including, without limitation, the Merger Agreement) and the other transactions contemplated thereby, then each of Corium and Parent, and their respective
boards of directors will grant such approvals and take such actions as are necessary so that the transactions contemplated by the Merger Agreement may be consummated as promptly as practicable on the
terms contemplated by the Merger Agreement and otherwise act to render such anti-takeover applicable law inapplicable. In the event it is asserted that one or more state takeover statutes is
applicable to the Offer or the Merger and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer or the Merger, Parent might be required to file certain
information with, or to receive approvals from, the relevant state authorities or holders of Shares, and Parent might be unable to accept for payment or pay for Shares tendered pursuant to the Offer,
or be delayed in continuing or consummating the Offer or the Merger. In such case, Parent may not be obligated to accept for payment or pay for any tendered Shares.
In
connection with its approval of the Merger Agreement, the Offer and the Merger, the Board adopted a resolution approving the Merger Agreement and the transactions contemplated
thereby, including the Offer, the Merger and any related documents for purposes of Section 203, but only insofar as each of the Offer and the Merger are consummated in accordance with the terms
of the Merger Agreement and the related agreements.
Regulatory Approvals
U.S. Antitrust Laws
Under the HSR Act, and the related rules and regulations that have been issued by the Federal Trade Commission
("
FTC
"), certain transactions having a value above specified thresholds may not be consummated until specified information and documentary material
("
Premerger Notification and Report Forms
") have been furnished to the FTC and the Antitrust Division of the Department of Justice (the
"
Antitrust Division
") and certain waiting period requirements have been satisfied.
53
Table of Contents
It is a condition to the Merger Sub's obligation to accept for payment and pay for Shares tendered pursuant to the Offer that the waiting period (and any
extension of the waiting period) applicable to the Offer under the HSR Act shall have expired or been terminated. Under the HSR Act, the purchase of Shares in the Offer may not be undertaken until the
expiration of a 15 calendar day waiting period following the filing by the ultimate parent entity of Parent, of a Premerger Notification and Report Form concerning the Offer with the FTC and the
Antitrust Division, unless the waiting period is earlier terminated by the FTC and the Antitrust Division. If within the 15 calendar day waiting period either the FTC or the Antitrust Division were to
issue a request for additional information and documentary material (a "
Second Request
"), the waiting period with respect to the Transactions would be
extended until 10 calendar days following the date of substantial compliance by Parent with that request, unless the FTC and the Antitrust Division terminated the additional waiting period before its
expiration. The 10 calendar day waiting period can be extended with the consent of Corium. If either the 15-day or 10-day waiting period expires on a Saturday, Sunday or federal holiday, then such
waiting period will be extended until 11:59 p.m. of the next day that is not a Saturday, Sunday or federal holiday. Only one extension of the waiting period pursuant to a Second Request is
authorized by the HSR Act. After that time, the waiting period may be extended only by court order or with Corium's consent. The FTC and the Antitrust Division may terminate the additional 10-day
waiting period before its expiration. In practice, complying with a Second Request can take a significant period of time. If the HSR Act waiting period expired or was terminated, completion of the
Merger would not require an additional filing under the HSR Act if Merger Sub owns 50% or more of the outstanding Shares at the time of
the Merger and the Merger occurs within one year after the HSR Act waiting period applicable to the Transactions expired or was terminated.
The
FTC and the Antitrust Division may scrutinize the legality under U.S. federal antitrust laws of transactions such as Merger Sub's proposed acquisition of Corium. At any time before
or after Merger Sub's acceptance for payment of Shares pursuant to the Offer, if the Antitrust Division or the FTC believes that the Offer would violate the U.S. federal antitrust laws by
substantially lessening competition in any line of commerce affecting U.S. consumers, the FTC and the Antitrust Division have the authority to challenge the Transactions by seeking a federal court
order enjoining the Transactions or, if Shares have already been acquired, requiring disposition of those Shares, or the divestiture of substantial assets of Merger Sub, Corium, or any of their
respective subsidiaries or affiliates, or seeking other conduct relief. At any time before or after consummation of the Transactions, notwithstanding the early termination of the applicable waiting
period under the HSR Act, U.S. state attorneys general and private persons may also bring legal action under the antitrust laws seeking similar relief or seeking conditions to the completion of the
Offer. There can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if a challenge is made, what the result will be. If any such action is threatened or commenced
by the FTC, the Antitrust Division or any state or any other person, Merger Sub may not be obligated to consummate the Offer or the Merger.
Gurnet
filed a Premerger Notification and Report Form on October 25, 2018. Corium filed a Premerger Notification and Report Form on October 25, 2018.
Stockholder Approval of the Merger Not Required
Because the Merger will be consummated in accordance with Section 251(h) of the DGCL, no stockholder vote or consent will be necessary to
effect the Merger. Section 251(h) of the DGCL provides that, subject to certain statutory provisions, if, following consummation of a tender offer for any and all shares of the stock of a
public corporation (other than stock owned by the acquirer, the target corporation or any of their respective wholly-owned subsidiaries), the acquirer holds at least the percentage of stock, and of
each class or series thereof, of the target corporation that, absent Section 251(h) of the DGCL, would be required to adopt a merger agreement, and stock that was the
54
Table of Contents
subject
of the tender offer but not tendered into the tender offer is converted into the same consideration for their stock in the merger as was payable in the tender offer, then the acquirer can
effect a merger without the vote of the stockholders of the target corporation. Under the Merger Agreement, the Merger will become effective as soon as practicable after the consummation of the Offer,
without a vote of Corium's stockholders, in accordance with Section 251(h) of the DGCL.
Annual and Quarterly Reports
For additional information regarding the business and the financial results of Corium, please see Corium's Annual Report on Form 10-K for
the fiscal year ended September 30, 2017, and Corium's Quarterly Reports on Form 10-Q for the three months ended December 31, 2017, March 31, 2018, and June 30,
2018.
Forward-Looking Statements
This Schedule 14D-9 and the materials incorporated by reference herein contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 that involve risks and uncertainties, including, without limitation,
statements regarding the expected benefits and costs of the proposed transaction contemplated by the agreement between Parent and Corium; the expected timing of the completion of the proposed
transaction; the ability of Parent and Corium to complete the proposed transaction given the various closing conditions, some of which are outside the parties' control, including those conditions
related to regulatory approvals; the likelihood that the milestones underlying the CVR will be achieved; and any statements regarding the assumptions underlying any of the foregoing. Statements
containing words such as "could," "believe," "expect," "intend," "anticipate," "will," "may," or similar expressions constitute forward-looking statements. Forward-looking statements are based on
management's current expectations and projections and are subject to risks and uncertainties, which may cause actual events and results to differ materially from the statements contained herein.
Factors that may contribute to such differences include, but are not limited to, risks related to (i) uncertainties as to the timing of the proposed transaction; (ii) the risk that the
proposed transaction may not be completed in a timely manner or at all; (iii) uncertainties as to the percentage of Corium's stockholders that will support the proposed transaction and tender
their shares; (iv) the possibility that competing offers or acquisition proposals for Corium will be made; (v) the possibility that any or all of the various conditions to the
consummation of the proposed transaction may not be satisfied or waived, including the failure to receive any required regulatory approvals from any
applicable governmental entities (or any conditions, limitations or restrictions placed on such approvals); (vi) the occurrence of any event, change or other circumstance that could give rise
to the termination of the agreement between Parent and Corium, including in circumstances that would require Corium to pay a termination fee or other expenses; (vii) the failure to obtain the
necessary financing to complete the proposed transaction; (viii) the effect of the announcement or pendency of the proposed transaction on Corium's ability to retain and hire key personnel, its
ability to maintain relationships with its partners, suppliers, licensees and others with whom it does business, or its operating results and business generally; (ix) risks related to diverting
management's attention from Corium's ongoing business operations; (x) the risk that unexpected costs will be incurred in connection with the proposed transaction; (xi) changes in
economic conditions, political conditions, regulatory requirements, licensing requirements and tax matters; (xii) the risk that stockholder litigation in connection with the proposed
transaction may result in significant costs of defense, indemnification and liability and (xiii) other factors as set forth from time to time in Corium's filings with the SEC, which are
available on Corium's investor relations website at www.ir.coriumgroup.com/investor-relations and on the SEC's website at www.sec.gov. The foregoing list of risks and uncertainties is illustrative,
but is not exhaustive. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made. Except as may be required by law, Corium does not intend, and
undertakes no duty, to update any forward-looking statements to
55
Table of Contents
reflect
new information, events or circumstances after the date they were made or to reflect the occurrence of unanticipated events.
Item 9. Exhibits
The following Exhibits are attached hereto:
|
|
|
|
|
(a)(1)(A)
|
|
Offer to Purchase, dated October 26, 2018 (incorporated by reference to Exhibit (a)(1)(A) to the Tender Offer
Statement on Schedule TO filed with the SEC by Gurnet Holding Company and Gurnet Merger Sub, Inc. on October 26, 2018
("
Schedule TO
")).
|
|
(a)(1)(B)
|
|
Letter of Transmittal (incorporated by reference to Exhibit (a)(1)(B) to the Schedule TO).
|
|
(a)(1)(C)
|
|
Notice of Guaranteed Delivery (incorporated by reference to Exhibit (a)(1)(C) to the
Schedule TO).
|
|
(a)(1)(D)
|
|
Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (incorporated by reference to
Exhibit (a)(1)(D) to the Schedule TO).
|
|
(a)(1)(E)
|
|
Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (incorporated by
reference to Exhibit (a)(1)(E) to the Schedule TO).
|
|
(a)(1)(F)
|
|
Summary Advertisement as published in the New York Times, dated October 26, 2018 (incorporated by reference to
Exhibit (a)(1)(F) to the Schedule TO).
|
|
(a)(1)(G)
|
|
Press Release issued by Corium International, Inc. on October 11, 2018 (incorporated by reference to
Exhibit 99.1 to the Current Report on Form 8-K filed with the SEC by Corium International, Inc. on October 11, 2018).
|
|
(a)(1)(H)
|
|
Press Release of Gurnet, announcing the launch of the Offer, dated October 26, 2018 (incorporated by reference to
Exhibit (d)(7) to the Schedule TO).
|
|
(a)(2)
|
|
None.
|
|
(a)(3)
|
|
None.
|
|
(a)(4)
|
|
None.
|
|
(a)(5)(A)
|
*
|
Opinion of Guggenheim Securities & Co. LLC, dated as of October 11, 2018 (included as Annex A to this Schedule 14D-9).
|
|
(b)
|
|
None.
|
|
(c)
|
|
None.
|
|
(d)
|
|
None.
|
|
(e)(1)
|
|
Agreement and Plan of Merger, among Corium International, Inc., Gurnet Holding Company and Gurnet Merger Sub,
Inc., dated as of October 11, 2018 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC by Corium International, Inc. on October 11, 2018).
|
|
(e)(2)
|
|
Commitment Letter, dated October 11, 2018, among Gurnet Point L.P. and Gurnet Holding Company (incorporated
by reference to Exhibit (d)(2) to the Schedule TO).
|
|
(e)(3)
|
|
Confidentiality Agreement, effective as of May 17, 2018, between Corium International, Inc. and Gurnet Point
Capital, LLC (incorporated by reference to Exhibit (d)(3) to the Schedule TO).
|
56
Table of Contents
|
|
|
|
|
(e)(4)
|
|
Form of Contingent Value Rights Agreement, between Gurnet Holding Company and Continental Stock Transfer & Trust
Company (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K filed with the SEC by Corium International, Inc. on October 11, 2018).
|
|
(e)(5)
|
|
Tender and Support Agreement, dated October 11, 2018, among Gurnet Holding Company, Gurnet Merger Sub, Inc.
and Essex Woodlands Health Ventures Fund VII, L.P. (incorporated by reference to Exhibit 2.3 to the Current Report on Form 8-K filed with the SEC by Corium International, Inc. on October 11, 2018).
|
|
(e)(6)
|
|
2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registration Statement on
Form S-1 with the SEC by Corium International, Inc. on March 3, 2014).
|
|
(e)(7)
|
|
2014 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to Corium's Registration Statement Amendment
on Form S-1/A filed with the SEC on March 24, 2014).
|
|
(e)(8)
|
|
Additional Form of Restricted Stock Unit Agreement under the 2014 Equity Incentive Plan (incorporated by
reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed with the SEC by Corium International, Inc. on February 12, 2016).
|
|
(e)(9)
|
|
Corium's 2014 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.5 to Corium's Registration
Statement Amendment on Form S-1/A filed with the SEC on March 24, 2014).
|
|
(e)(10)
|
|
Form of CEO Change in Control Severance Agreement (CEO) (incorporated by reference to Exhibit 10.9 to the
Annual Report on Form 10-K filed with the SEC by Corium International, Inc. on December 29, 2017).
|
|
(e)(11)
|
|
Form of Change in Control Severance Agreement (Other Executive) (incorporated by reference to Exhibit 10.10
to the Annual Report on Form 10-K filed with the SEC by Corium International, Inc. on December 29, 2017).
|
|
(e)(12)
|
|
Transition Bonus Plan (incorporated by reference to Exhibit (d)(6) to the Schedule TO).
|
|
(f)
|
|
None.
|
|
(g)
|
|
None.
|
|
(h)
|
|
None.
|
57
Table of Contents
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and
correct.
|
|
|
|
|
|
|
|
|
CORIUM INTERNATIONAL, INC.
|
|
|
By:
|
|
/s/ Peter D. Staple
|
|
|
|
|
Name:
|
|
Peter D. Staple
|
|
|
|
|
Title:
|
|
Chief Executive Officer
|
|
|
|
|
Date:
|
|
October 26, 2018
|
58
Table of Contents
ANNEX A
|
|
|
|
|
Guggenheim Securities, LLC
330 Madison Avenue
New York, New York 10017
Guggenheim
SecuritiesPartners.com
|
October 11,
2018
Board of Directors
Corium International, Inc.
235 Constitution Drive
Menlo Park, California 94025
Members
of the Board:
We
understand that Corium International, Inc. ("Corium"), Gurnet Holding Company ("Gurnet"), an affiliate of Gurnet Point L.P. ("GP"), and Gurnet Merger Sub, Inc.
("Purchaser"), a wholly owned subsidiary of Gurnet, intend to enter into an Agreement and Plan of Merger to be dated as of October 11, 2018 (the "Agreement"), pursuant to which
(i) Purchaser will commence the Offer (as defined below) and (ii) following consummation of the Offer, Gurnet, Purchaser and Corium will effect the Merger (as defined below). More
specifically pursuant to the Agreement, (x) Purchaser will commence a tender offer to purchase any and all issued and outstanding shares of common stock, par value $0.001 per share, of Corium
(the "Shares" and, such tender offer, the "Offer"), at a price of $12.50 per Share in cash (the "Initial Consideration") and an additional $0.50 per Share in cash (the "Contingent Consideration" and,
together with the Initial Consideration, the "Offer Consideration") conditioned upon achievement of the milestone set forth in, and subject to and in accordance with the terms and conditions of, the
Agreement and the Contingent Value Rights Agreement (the "CVR Agreement") and (y) following consummation of the Offer, (a) Purchaser will merge with and into Corium and Corium will
become a wholly owned subsidiary of Gurnet (the "Merger" and, taken together with the Offer as an integrated transaction, the "Transaction") and (b) pursuant to the Merger, each Share (other
than those held by Gurnet or Purchaser) will be converted into the Offer Consideration. The terms and conditions of the Transaction are more fully set forth in the Agreement.
You
have asked us to render our opinion as to whether the Offer Consideration is fair, from a financial point of view, to the stockholders of Corium.
In
the course of performing our reviews and analyses for rendering our opinion, we have:
-
-
Reviewed the Agreement dated as of October 11, 2018, including the form of the CVR Agreement attached as an annex thereto;
-
-
Reviewed certain publicly available business and financial information regarding Corium;
-
-
Reviewed certain non-public business and financial information regarding Corium's business and prospects (including, without limitation,
certain unadjusted and probability-adjusted financial projections for the years ending December 31, 2018 through December 31, 2037 and certain estimates as to potentially realizable
existing net operating loss carryforwards expected to be utilized by Corium), all as prepared and approved for our use by Corium's senior management;
-
-
Discussed with Corium's senior management their strategic and financial rationale for the Transaction as well as their views of Corium's
business, operations, historical and projected financial results, liquidity, funding needs and access to capital and future prospects (including, without limitation, their assumptions as to the
expected amounts, timing and pricing of future
A-1
Table of Contents
With
respect to the information used in arriving at our opinion:
-
-
We have relied upon and assumed the accuracy, completeness and reasonableness of all industry, business, financial, legal, regulatory, tax,
accounting, actuarial and other information (including, without limitation, any financial projections, other estimates and other forward-looking information) provided by or discussed with Corium or
obtained from public sources, data suppliers and other third parties.
-
-
We (i) do not assume any responsibility, obligation or liability for the accuracy, completeness, reasonableness, achievability or
independent verification of, and we have not independently verified, any such information (including, without limitation, any financial projections, other estimates and other forward-looking
information), (ii) express no view, opinion, representation, guaranty or warranty (in each case, express or implied) regarding the (a) reasonableness or achievability of any financial
projections, other estimates and other forward-looking information or the assumptions upon which they are based or (b) the probability adjustments reflected in such financial projections and
(iii) have relied upon the assurances of Corium's senior management that they are unaware of any facts or circumstances that would make such information (including, without limitation, any
financial projections, other estimates and other forward-looking information) incomplete, inaccurate or misleading.
-
-
Specifically, with respect to any (i) financial projections, other estimates and other forward-looking information provided by or
discussed with Corium, (a) we have been advised by Corium's senior management, and we have assumed, that such financial projections (including, without limitation, the probability adjustments
reflected therein and the expected development and commercialization of Corium's products and product candidates), other estimates and other forward-looking information utilized in our analyses have
been reasonably prepared on bases reflecting the best currently available estimates and judgments of Corium's senior management and (b) we have assumed that such financial projections, other
estimates and other forward-looking information have been reviewed by Corium's Board of Directors with the understanding that such information will be used and relied upon by us in connection with
rendering our opinion and (ii) financial projections, other estimates and/or other forward-looking information obtained by us from public sources, data suppliers and other third parties, we
have assumed that such information is reasonable and reliable.
During
the course of our engagement, we were asked by Corium's Board of Directors to solicit indications of interest from various third parties regarding a potential transaction with
Corium, and we have considered the results of such solicitation process in rendering our opinion.
In
arriving at our opinion, we have not performed or obtained any independent appraisal of the assets or liabilities (including, without limitation, any contingent, derivative or
off-balance sheet assets and liabilities) of Corium or any other entity or the solvency or fair value of Corium or any other entity, nor have we been furnished with any such appraisals. We are not
legal, regulatory, tax,
A-2
Table of Contents
consulting,
accounting, appraisal or actuarial experts and nothing in our opinion should be construed as constituting advice with respect to such matters; accordingly, we have relied on the
assessments of
Corium's senior management and Corium's other professional advisors with respect to such matters. We are not expressing any view or rendering any opinion regarding the tax consequences of the
Transaction to Corium or its stockholders.
In
rendering our opinion, we have assumed that, in all respects meaningful to our analyses, (i) Corium, Gurnet and Purchaser will comply with all terms and provisions of the
Agreement and (ii) the representations and warranties of Corium, Gurnet and Purchaser contained in the Agreement are true and correct and all conditions to the obligations of each party to the
Agreement to consummate the Transaction will be satisfied without any waiver, amendment or modification thereof. We also have assumed that the Transaction will be consummated in a timely manner in
accordance with the terms of the Agreement and in compliance with all applicable laws, documents and other requirements, without any delays, limitations, restrictions, conditions, waivers, amendments
or modifications (regulatory, tax-related or otherwise) that would have an effect on Corium, Gurnet, Purchaser or the Transaction in any way meaningful to our analyses or opinion.
In
rendering our opinion, we do not express any view or opinion as to the price or range of prices at which the Shares or other securities or financial instruments of or relating to
Corium may trade or otherwise be transferable at any time, including subsequent to the announcement or consummation of the Transaction.
We
have acted as a financial advisor to Corium in connection with the Transaction and will receive a customary fee for such services, a substantial portion of which is payable upon
successful consummation of the Transaction and a portion of which is payable upon delivery of our opinion. In addition, Corium has agreed to reimburse us for certain expenses and to indemnify us
against certain liabilities arising out of our engagement.
As
previously disclosed, during the past two years Guggenheim Securities, LLC ("Guggenheim Securities") has not been engaged by Corium to provide financial advisory or other
investment banking services with respect to matters unrelated to the Transaction for which we have received or expect to receive compensation, except in connection with Corium's $35 million
follow-on offering in 2017, for which we acted as a co-manager and received agreed upon compensation. During the past two years, Guggenheim Securities has not been engaged by Gurnet or GP to
provide financial advisory or other investment banking services for which we received or expect to receive compensation. Guggenheim Securities may seek to provide Corium, GP and Gurnet and
their respective affiliates with certain financial advisory and investment banking services unrelated to the Transaction in the future, for which services Guggenheim Securities would expect to receive
compensation.
Guggenheim
Securities and its affiliates and related entities engage in a wide range of financial services activities for our and their own accounts and the accounts of customers,
including, without limitation: asset, investment and wealth management; insurance services; investment banking, corporate finance, mergers and acquisitions and restructuring; merchant banking; fixed
income and equity sales, trading and research; and derivatives, foreign exchange and futures. In the ordinary course of these activities, Guggenheim Securities and its affiliates and related entities
may (i) provide such financial services to Corium, GP, Gurnet, other participants in the Transaction and their respective affiliates, investment
funds and portfolio companies, for which services Guggenheim Securities and its affiliates and related entities may have received, and may in the future receive, compensation and (ii) directly
and indirectly hold long and short positions, trade and otherwise conduct such activities in or with respect to loans, debt and equity securities and derivative products of or relating to
Corium, GP, Gurnet, other participants in the Transaction and their respective affiliates, investment funds and portfolio companies. Furthermore, Guggenheim Securities and its affiliates and
related entities and our or their respective directors, officers, employees, consultants and agents may have investments in
A-3
Table of Contents
Corium, GP,
Gurnet, other participants in the Transaction and their respective affiliates, investment funds and portfolio companies.
Consistent
with applicable legal and regulatory guidelines, Guggenheim Securities has adopted certain policies and procedures to establish and maintain the independence of its research
departments and personnel. As a result, Guggenheim Securities' research analysts may hold views, make statements or investment recommendations and publish research reports with respect to
Corium, GP, Gurnet, other participants in the Transaction and their respective affiliates, investment funds and portfolio companies and the Transaction that differ from the views of Guggenheim
Securities' investment banking personnel.
Our
opinion has been provided to Corium's Board of Directors (in its capacity as such) for its information and assistance in connection with its evaluation of the Offer Consideration.
Our opinion may not be disclosed publicly, made available to third parties or reproduced, disseminated, quoted from or referred to at any time, in whole or in part, without our prior written consent;
provided
,
however
, that this letter may be included in its entirety in any Solicitation/Recommendation
Statement on Schedule 14D-9 or any proxy statement to be distributed to the holders of the Shares in connection with the Transaction.
Our
opinion and any materials provided in connection therewith do not constitute a recommendation to Corium's Board of Directors with respect to the Transaction, nor does our opinion
constitute advice or a recommendation to any holder of the Shares as to whether to tender any such Shares pursuant to the Offer or how to vote or act in connection with the Transaction or otherwise.
Our opinion does not address Corium's underlying business or financial decision to pursue the Transaction, the relative merits of the Transaction as compared to any alternative business or financial
strategies that might exist for Corium, the financing of the Transaction by GP, Gurnet or Purchaser or the effects of any other transaction in which Corium might engage. Our opinion addresses
only the fairness, from a financial point of view and as of the date hereof, of the Offer Consideration to the stockholders of Corium to the extent expressly specified herein. We do not express any
view or opinion as to (i) any other term, aspect or implication of (a) the Transaction (including, without limitation, the form or structure of the Transaction) or the Agreement or
(b) any tender and support agreement, the CVR Agreement or any other agreement, transaction document or instrument contemplated by the Agreement or to be entered into or amended in connection
with the Transaction, (ii) the likelihood or probability of the achievement
or satisfaction of the milestone necessary for the Contingent Consideration to be paid in accordance with the CVR Agreement or (iii) the fairness, financial or otherwise, of the Transaction to,
or of any consideration to be paid to or received by, the holders of any class of securities (other than as expressly specified herein), creditors or other constituencies of Corium. Our opinion does
not address the individual circumstances of specific holders of Corium's securities (including, without limitation, stock options and warrants) with respect to rights or aspects which may distinguish
such holders or Corium's securities (including, without limitation, stock options and warrants) held by such holders. Furthermore, we do not express any view or opinion as to the fairness, financial
or otherwise, of the amount or nature of any compensation payable to or to be received by any of Corium's directors, officers or employees, or any class of such persons, in connection with the
Transaction relative to the Offer Consideration or otherwise.
Our
opinion has been authorized for issuance by the Fairness Opinion and Valuation Committee of Guggenheim Securities. Our opinion is subject to the assumptions, limitations,
qualifications and other conditions contained herein and is necessarily based on economic, capital markets and other conditions, and the information made available to us, as of the date hereof. We
assume no responsibility for updating or revising our opinion based on facts, circumstances or events occurring after the date hereof.
Based
on and subject to the foregoing, it is our opinion that, as of the date hereof, the Offer Consideration is fair, from a financial point of view, to the stockholders of Corium.
Very
truly yours,
/s/
GUGGENHEIM SECURITIES, LLC
GUGGENHEIM
SECURITIES, LLC
A-4
Table of Contents
ANNEX B
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
§ 262.
Appraisal rights
(a) Any
stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with
respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to § 228 of this title shall be entitled to an appraisal by the Court of Chancery of
the fair value of the stockholder's shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word "stockholder" means a
holder of record of stock in a corporation; the words "stock" and "share" mean and include what is ordinarily meant by those words; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in 1 or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal
rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to § 251(g) of this title), § 252, § 254, § 255,
§ 256, § 257, § 258, § 263 or § 264 of this title:
(1) Provided,
however, that, except as expressly provided in § 363(b) of this title, no appraisal rights under this section shall be available for the
shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of the meeting of
stockholders to act upon the agreement of merger or consolidation (or, in the case of a merger pursuant to § 251(h), as of immediately prior to the execution of the agreement of
merger), were either: (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for
any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in
§ 251(f) of this title.
(2) Notwithstanding
paragraph (b)(1) of this section, appraisal rights under this section shall be available for the shares of any class or series of stock of a
constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to §§ 251, 252, 254, 255, 256, 257, 258, 263
and 264 of this title to accept for such stock anything except:
a. Shares
of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof;
b. Shares
of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository
receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or held of record by more than 2,000 holders;
c. Cash
in lieu of fractional shares or fractional depository receipts described in the foregoing paragraphs (b)(2)a. and b. of this section; or
d. Any
combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing
paragraphs (b)(2)a., b. and c. of this section.
B-1
Table of Contents
(3) In
the event all of the stock of a subsidiary Delaware corporation party to a merger effected under § 253 or § 267 of this title is
not owned by the parent immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation.
(4) In
the event of an amendment to a corporation's certificate of incorporation contemplated by § 363(a) of this title, appraisal rights shall be
available as contemplated by § 363(b) of this title, and the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall
apply as nearly as practicable, with the word "amendment" substituted for the words "merger or consolidation," and the word "corporation" substituted for the words "constituent corporation" and/or
"surviving or resulting corporation."
(c) Any
corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its
stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the
assets of the corporation. If the certificate of incorporation contains such a provision, the provisions of this section, including those set forth in subsections (d), (e) and
(g) of this section, shall apply as nearly as is practicable.
(d) Appraisal
rights shall be perfected as follows:
(1) If
a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for notice of such meeting (or such members who received notice in
accordance with § 255(c) of this title) with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) of this section that
appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section and, if 1 of the constituent corporations is a
nonstock corporation, a copy of § 114 of this title. Each stockholder electing to demand the appraisal of such stockholder's shares shall deliver to the corporation, before the
taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity
of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder's shares. A proxy or vote against the merger or consolidation shall not constitute such a
demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective; or
(2) If
the merger or consolidation was approved pursuant to § 228, § 251(h), § 253, or § 267 of
this title, then either a constituent corporation before the effective date of the merger or consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each
of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section and, if 1 of the constituent corporations is a
nonstock corporation, a copy of § 114 of this title. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice or, in the case of a
merger approved pursuant to § 251(h) of this title, within the later of the consummation of the offer contemplated by § 251(h) of this title and 20 days
after the date of mailing of such notice, demand in writing from the
B-2
Table of Contents
surviving
or resulting corporation the appraisal of such holder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such holder's shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each
such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent
corporation that are
entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within
10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice or, in the case of a merger approved
pursuant to § 251(h) of this title, later than the later of the consummation of the offer contemplated by § 251(h) of this title and 20 days following the
sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance,
a record date that shall be not more than 10 days prior to the date the notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the
record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within
120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) of this section hereof and who is otherwise entitled to appraisal rights, may commence an appraisal proceeding by filing a petition in the Court of Chancery
demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation,
any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party shall have the right to withdraw such stockholder's demand for appraisal and to accept the
terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) of this section hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a
statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation(or, in the case of a merger approved pursuant to § 251(h) of this title, the
aggregate number of shares (other than any excluded stock (as defined in § 251(h)(6)d. of this title)) that were the subject of, and were not tendered into, and accepted for
purchase or exchange in, the offer referred to in § 251(h)(2)), and, in either case, with respect to which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholder's written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) of this section hereof, whichever is later.
Notwithstanding subsection (a) of this section, a person who is the beneficial owner of shares of such stock held either in a voting trust or by a nominee on behalf of such person may, in such
person's own name, file a petition or request from the corporation the statement described in this subsection.
(f) Upon
the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within
20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have
demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting
B-3
Table of Contents
corporation.
If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the
Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the
list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in
the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At
the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The
Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder. If immediately
before the merger or consolidation the shares of the class or series of stock of the constituent corporation as to which appraisal rights are available were listed on a national securities exchange,
the Court shall dismiss the proceedings as to all holders of such shares who are otherwise entitled to appraisal rights unless (1) the total number of shares entitled to appraisal exceeds 1% of
the outstanding shares of the class or series eligible for appraisal, (2) the value of the consideration provided in the merger or consolidation for such total number of shares exceeds
$1 million, or (3) the merger was approved pursuant to § 253 or § 267 of this title.
(h) After
the Court determines the stockholders entitled to an appraisal, the appraisal proceeding shall be conducted in accordance with the rules of the Court of Chancery,
including any rules specifically governing appraisal proceedings. Through such proceeding the Court shall determine the fair value of the shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court
shall take into account all relevant factors. Unless the Court in its discretion determines otherwise for good cause shown, and except as provided in this subsection, interest from the effective date
of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time
to time during the period between the effective date of the merger and the date of payment of the judgment. At any time before the entry of judgment in the proceedings, the surviving corporation may
pay to each stockholder entitled to appraisal an amount in cash, in which case interest shall accrue thereafter as provided herein only upon the sum of (1) the difference, if any, between the
amount so paid and the fair value of the shares as determined by the Court, and (2) interest theretofore accrued, unless paid at that time. Upon application by the surviving or resulting
corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the
stockholders entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has
submitted such stockholder's certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is
not entitled to appraisal rights under this section.
(i) The
Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders
entitled thereto. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the
surrender to the corporation of the certificates representing such stock. The Court's decree may be enforced as other decrees in the Court of
B-4
Table of Contents
Chancery
may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state.
(j) The
costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a
stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal.
(k) From
and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section
shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record
at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e)
of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just; provided, however that this provision shall not affect the right of any stockholder who
has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder's demand for appraisal and to accept the terms offered upon the merger or
consolidation within 60 days after the effective date of the merger or consolidation, as set forth in subsection (e) of this section.
(l) The
shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or
consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation.
B-5
CORIUM INTERNATIONAL, INC. (NASDAQ:CORI)
Gráfica de Acción Histórica
De May 2024 a Jun 2024
CORIUM INTERNATIONAL, INC. (NASDAQ:CORI)
Gráfica de Acción Histórica
De Jun 2023 a Jun 2024